Criminal Injuries Compensation

Lord Thomas of Gresford: asked Her Majesty's Government:
	What proportion of awards in criminal injuries compensation in the last financial year were directed to claimants in categories of compensation which are to be abolished.

Lord Goldsmith: My Lords, in our Green Paper issued in December, Rebuilding Lives—supporting victims of crime, we proposed refocusing the Criminal Injuries Compensation Scheme around seriousness, with more seriously injured victims getting more money and less seriously injured victims getting better support services rather than financial compensation. The paper has invited views on this concept and on how this idea of seriousness might be defined. Decisions about the scheme will be shaped by answers to the consultation, which runs until 1 March this year.

Lord Thomas of Gresford: My Lords, I thank the noble and learned Lord for his reply. Is he aware that in 1996–97 the then government budgeted for the payment of compensation to the victims of crime in the sum of £230 million—the equivalent of £265 million today—but we were told by the noble Baroness Lady Scotland in November 2004 that the current budget was only £163 million, a cut of about £100 million? We have not been given an answer to my Question regarding the percentage of claimants who are to be excluded. How does the noble and learned Lord reconcile such savage cuts in compensation with the blather that we have to put up with from this Government that the victim is being placed always at the centre of the criminal justice system?

Lord Goldsmith: Well really, my Lords. If the noble Lord would read the Green Paper, which I am sure he has, he would see all of the things that we have already done for victims—the witness care units and the new provisions that are being made now. There is less chance of being a victim of crime today than in 1981—the lowest for 25 years. As to the figures, the compensation scheme provided in this country for criminal injuries, on the most recent assessment, provided more than all other EU countries put together.
	The noble Lord will understand why I was not able to answer his Question, because this paper is looking at which of the bands should become those where people do not receive financial compensation, which they often receive a year after the event, but receive practical support instead. So I entirely reject the way that the noble Lord put his supplementary question.

Baroness Wilcox: My Lords, I have read that wonderful document from cover to cover and we are very keen to encourage the noble and learned Lord in that endeavour, so my question is definitely for information. What consideration has the Minister given to the establishment of a separate compensation scheme to assist the victims of terrorist attacks perpetrated either in the United Kingdom or abroad?

Lord Goldsmith: My Lords, I am grateful to the noble Baroness, not only for reading the paper, but for what she said in support. We are looking at how that issue can be dealt with. It emerged as a result of the events that we have sadly seen throughout the world. So we are looking both at ways of raising public awareness of insurance to deal with some of the immediate consequences of terrorist attacks and the option of setting up a national disaster charitable fund to provide immediate help to victims. These are complicated issues and the Government will make an announcement on them in due course.

Lord Soley: My Lords, does my noble and learned friend agree that, as he indicated, this is probably one of the best schemes in the world and we should all be very proud of it? But the problem has always been that if the scheme is spread too widely, those who are most in need, often from dreadful injuries, do not get sufficient help. That is really what we should be addressing in the consultation, which I am glad to hear will be going on until March.

Lord Goldsmith: My Lords, my noble friend is absolutely right. We want to look at removing, or at least raising, the cap, which at the moment prevents those with the most serious injuries getting the most compensation. But we also need to look at the lower ranges. Something like over 50 per cent of the awards are in the £1,000 to £2,000 range. We have done a survey to look at what people spend the money on. Very little of it is spent, for example, on the things that would deal directly with the effects of crime, such as cosmetic treatment or surgery, and that is partly because the compensation is paid very late. That is why we want to look at whether it makes more sense to provide immediate practical support to those victims and free up some cash for the most seriously injured.

Lord Tebbit: My Lords, will the noble and learned Lord give some consideration to the fact that compensation may be far too little in the event that victims who may need lifelong care may live far longer than expected or that it may be far too much if, sadly, they live for only a short time, in which case their families will inherit money for no good reason? Can we not give consideration to making the award an annual sum, which would be available to the victim for life and for life only? That would seem to deal with both those problems.

Lord Goldsmith: My Lords, the noble Lord makes a valuable and important point that we should be looking at in the context of the response to the Green Paper.

Religious Freedom

Lord Anderson of Swansea: asked Her Majesty's Government:
	What efforts they are making to promote freedom of worship abroad.

Lord Triesman: My Lords, we continue to condemn all instances where individuals are persecuted because of their faith or belief, wherever they happen and whatever the religion of the individual or group concerned. We urge all states to pursue laws and practices which foster tolerance and mutual respect and protect religious minorities from discrimination. I refer the House and my noble friend to the 2005 annual report on human rights, which highlights much of the work that we have done in this area.

Lord Anderson of Swansea: My Lords, your Lordships will be aware of the increasing threats to freedom of worship, even in friendly countries on the Indian sub-continent. In several states of India, for example, there are anti-conversion laws, and Sri Lanka is considering similar legislation. The blasphemy laws in Pakistan are causing great anxiety, and in Bangladesh there are strong pressures for Sharia law. Has my noble friend made representations to those countries? Given this background, why has the Foreign and Commonwealth Office not convened the Religious Freedom Panel, which allows non-governmental organisations to make representations to the Foreign and Commonwealth Office? The panel has not met for more than two years. When will it be convened?

Lord Triesman: My Lords, I start by referring to the panel. It is perfectly true to say that it has not met for some time, principally because our focus in the FCO has been on the work of the EU presidency. But we have worked with the faith groups which are represented and with interested NGOs on religious freedom issues. We intend to fix a date for a further meeting of the panel within the next few months and we will be in touch shortly with panel members.
	We have been in touch with all the countries mentioned by my noble friend. We do not believe that the anti-conversion legislation in Sri Lanka is acceptable, and we make bilateral and multilateral representations. In India, although no specific cases of abuse have been raised with us, we are following the matter closely. In Pakistan, we are concerned at the discrimination faced by religious minorities and are actively engaged with the Government of Pakistan on the repeal or modification of its blasphemy laws. As I said in my initial response, we will pursue the issues of tolerance and religious freedom assiduously.

Lord Roberts of Llandudno: My Lords, with so many instances of denial of religious freedom in many ways, what strong action are the Government taking to ensure that every member state of the United Nations that signed the Universal Declaration of Human Rights in 1948 accepts all that that declaration means? Article 18 says:
	"Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief, and freedom, either alone or in community with others and in public or private, to manifest his religion or belief in teaching, practice, worship and observance".

Lord Triesman: My Lords, most of our efforts consist of trying to work bilaterally with governments where we believe that there is a problem. On the wider international stage, along with our EU partners, last November we co-sponsored a UN resolution on the elimination of all forms of intolerance and discrimination based on religion or belief. It was adopted without a vote. I shall not quote extensively from that document, but it shows precisely the values that I know are dear to the heart of this House.

Lord Taylor of Blackburn: My Lords, does my noble friend agree that we are privileged to be members of the Commonwealth? The Minister named various countries, and quite a number are members of the Commonwealth. Surely we should be using that organisation to this effect?

Lord Triesman: My Lords, that is quite right, and indeed we do. Discussions in the run-up to the Commonwealth Heads of Government Meeting in Malta in the latter part of last year showed conclusively that Don McKinnon, the Secretary-General of the Commonwealth, and those working most closely with him are attentive to these issues. The Commonwealth is a source of influence, and one which we must certainly pursue.

The Lord Bishop of Exeter: My Lords, is the Minister aware that the government of Qatar has recently donated land to enable the first Christian Church centre to be built in that area since the seventh century? Will he join me in congratulating those who are involved in such ventures, and comment on government policy on recognising, welcoming and supporting such initiatives in sensitive areas of the world?

Lord Triesman: My Lords, I completely agree with the right reverend Prelate. Our links with Qatar have indicated just how warmly we welcome that development. Generally speaking, aside from saying to people on occasions—as we must—that we find legislation and practices unacceptable in the light of our demand for religious tolerance, we must also be fulsome and open when people are acting in a way which we would welcome.

Baroness Sharples: My Lords, the noble Lord said in response to the noble Lord, Lord Anderson of Swansea, that the panel has not met because of the UK holding the EU presidency, which was only six months. However, the panel has not met for two years.

Lord Triesman: My Lords, I did say that. I said that that was our priority over the recent period. That is the case. It is and has been our priority, but we have stayed in very close contact with the 60 groups that comprise that body. There is a good argument to say that it would have been better had it met earlier. I intend to ensure that it meets as fast as it can.

Lord Hylton: My Lords, does the Minister agree that there are wide variations within the Muslim world as to whether minority religions can establish new places of worship? Will the Government continue to press for more openness where there are current bans or restrictions?

Lord Triesman: My Lords, we will continue to press for precisely those outcomes. We are prepared to argue that whether it is hostility to Christianity, Islamophobia or anti-Semitism makes no difference. It is a universal right that people should be able to pursue their religion with dignity and freedom, and we will argue that whatever the circumstances, whatever the faith, whatever the country.

Lord Howell of Guildford: My Lords, will the Minister pay particular attention to the intervention of the noble Lord, Lord Taylor of Blackburn, about the Commonwealth? It is a 54-nation grouping stretching across continents and many faiths. There are 500 million Muslims within the Commonwealth, which is potentially a good instrument for promoting religious tolerance. Will he put it rather higher up the list in the catalogue of Foreign Office priorities to build on the Commonwealth membership as a valuable asset in promoting tolerance, stability and peace in the world?

Lord Triesman: My Lords, I agree with that. I do not know whether we could put it higher up, because it has not dropped down the list to any extent. The work that we have done with the Secretary-General of the Commonwealth and its institutions has been precisely to the ends that the noble Lord has illustrated. The Commonwealth is an extraordinary club. It probably could not be invented in the modern world. It is a great historical accident that we have it, but we must make the fullest use of its virtues.

Bank of England Act 1998

Lord Barnett: asked Her Majesty's Government:
	What consideration they have given to proposals for the amendment of the Bank of England Act 1998.

Lord McKenzie of Luton: My Lords, among other matters, the Bank of England Act 1998 provides the bank with the power to set interest rates, which, as I said to this House on 8 November, has been spectacularly successful in helping to guide the UK economy. The Government are content with the Act and, for that reason, have no intention to amend it.

Lord Barnett: My Lords, I thank my noble friend for that reply. Nobody could disagree with the fact that the Monetary Policy Committee has usually been successful in meeting the target for inflation. On the other hand, I am sure he is aware that under Section 11 of the Act, which contains the three small words "subject to that"—that is, getting the inflation rate right—it is supposed to take account of the Government's economic policy. It seems to have totally disregarded that section of the Act. If the Minister is not prepared to do anything about the Act, will he at least emphasise, publicly, that it is the intention of the Government that the Monetary Policy Committee should abide by that aspect of the Act too? There will be a meeting of the Monetary Policy Committee tomorrow. I am sure that it will be waiting urgently to hear what my noble friend has to say about interest rates after tomorrow's debate.

Lord McKenzie of Luton: My Lords, it is not for the Government to opine on what interest rate levels should be. The purpose of the independence of the Bank of England is that the Monetary Policy Committee should set them. The noble Lord was right to say that the remit of the policy committee is to deliver price stability, but, without prejudice to that objective, to support the Government's economic policy, including their objectives for growth and employment. The committee has done that. That is manifested in the fact that our economy has continued to grow. There have been 34 successive quarters of growth under this Labour Government and employment is at its highest level ever.

Lord Lawson of Blaby: My Lords, I congratulate the Minister on his robust rejection of the siren appeal of the noble Lord, Lord Barnett. Is he aware—I am sure that he is—that any attempt to set other objectives for the Bank of England and to attach more importance to them would water down, in the eyes of the financial markets, the commitment to maintaining price stability, thereby making its task considerably more difficult?

Lord McKenzie of Luton: My Lords, I agree with the thrust of that question. Price stability is a precondition for high and stable levels of growth and employment, which in turn will help to create the conditions for price stability on a sustainable basis. That is the pre-eminent requirement of the Monetary Policy Committee and it has been delivered. It would be wrong to undermine that credibility, which has been hard won. It is important that we do not do that.

Lord Razzall: My Lords, notwithstanding the late conversion of the noble Lord, Lord Lawson, to the independence of the Bank of England, does the Minister accept that whether central banks should be concerned solely with price stability and inflation or whether they should also take into account other economic considerations is a real issue? Does he also accept that the Bank of England, since 1997, has probably been a beacon of achievement here when compared with the European Central Bank?

Lord McKenzie of Luton: My Lords, I certainly agree with that latter point. That has been acknowledged by the OECD and others. However, I stress that the Monetary Policy Committee and the Bank of England have to take into account a number of factors, but price stability is the key. In that regard, the remit of the Bank of England is not dissimilar to that of the European Central Bank.

Lord Forsyth of Drumlean: My Lords, will the Minister take this opportunity to offer some comment on reports which have appeared today suggesting that the Bank of England is so concerned about the reliability of government statistics that it is now setting up its own unit to obtain material on which it can rely?

Lord McKenzie of Luton: My Lords, prior to the Pre-Budget Report, the Chancellor of the Exchequer announced that the Office for National Statistics is to be given independence. Legislation to that effect will come forward during the course of this year. That has been widely welcomed and it is the right thing to do. However, it is wrong perpetually to seek to undermine the opinions of the Office for National Statistics. It serves the country and the economy well.

Baroness Noakes: My Lords, does the Minister agree that monetary policy is enhanced by a robust and independent Governor of the Bank of England, one, for example, who is prepared to speak his mind on the Chancellor's fiddling around with the golden rule? Will he therefore agree that the Bank of England Act would be better if the appointment and, importantly, the reappointment of the Governor were in the hands not of the Government, but of an independent body?

Lord McKenzie of Luton: My Lords, the appointment of the Governor is a Crown appointment undertaken on the advice of the Prime Minister and the Chancellor of the Exchequer. I believe that that has served the system well to date. I reject any assertion that there has been fiddling with the figures. It is important that the Governor of the Bank of England is able to express robust views. This one certainly has. That is part of the independence and credibility of the system that we have.

Lord Harrison: My Lords, is it not the case that not only the statutes of the European Central Bank but also the statutes of the American Fed state that once price stability has been taken into account, other policies should be supported, in the case of the American Fed, for instance, to reduce unemployment? Surely, the case being made by the noble Lord, Lord Barnett, is that once price stability has been maintained, it is open to the MPC to aid and abet government policies in these other areas.

Lord McKenzie of Luton: My Lords, it is right that the Federal Reserve has a slightly wider remit than the Bank of England or the ECB, but I stress that, by its focus on price stability, the bank is supporting the other key components of government policy. That is manifest in what has happened in the success of the economy, in growth and in employment levels. The Bank of England is doing its job in this regard and no adjustment to the Act is necessary.

Lord Barnett: My Lords, will my noble friend ignore the always dangerous support of the noble Lord, Lord Lawson, and recognise that what I was suggesting in no way undermines the Act? The Act specifically states, "subject to that"—namely, getting the rate of inflation right—it should consider the Government's economic policy. Will my noble friend emphasise that that is the case?

Lord McKenzie of Luton: My Lords, I am happy to emphasise that that is what the Act states. There is no suggestion that the Bank of England is not aware of that or has not had regard to it in the conduct of its operations.

Royal Succession: Primogeniture

Lord Dubs: asked Her Majesty's Government:
	Whether they have any proposal that primogeniture in succession to the throne should be abolished.

Lord Falconer of Thoroton: My Lords, it is not right to have gender discrimination, including in the choice of the succession, but there is no groundswell for change. A change would require complex constitutional legislation and consultation with the Commonwealth. We have no plans to embark on such a course.

Lord Dubs: My Lords, I thank my noble and learned friend for an Answer that is not very helpful. Surely, the monarchy should reflect the values of our society. It cannot do that if succession is based upon discrimination against women. Does my noble and learned friend agree that the Queen has demonstrated throughout her reign that women can do the job as well as, and probably better than, men? Is there not a case for change?

Lord Falconer of Thoroton: My Lords, we have a Queen who is widely admired throughout the world. The heir to the throne is a man, the heir to the throne's son is a man and his second son is a man. Now is not the time to embark on change.

Lord Strathclyde: My Lords, is the noble and learned Lord aware that this issue has been discussed and debated many times, most recently on a Private Member's Bill promoted by the noble Lord, Lord Dubs? The Government's response at that time was exactly the same as the response that the noble and learned Lord gave today. My response was then, as it is today, to wholly support what the noble and learned Lord the Lord Chancellor has said.

Lord Falconer of Thoroton: My Lords, I am very, very grateful to the wise and learned noble Lord, but I did not detect a question, unfortunately.

Earl Ferrers: My Lords, is the noble and learned Lord aware of the pleasure that his Answer will give? I refer not just to the Answer itself but to the fact that there appears to be at least one area of government that the Government are not prepared to screw up, particularly in relation to the constitution.

Lord Falconer of Thoroton: My Lords, I was aware of the pleasure that my Answer would give in certain quarters, although it is rather unfair of the noble Earl to refer to the other constitutional changes we have made as "screwing up" certain arrangements. I hope that as time goes on the merit of what we have done will become apparent.

Lord Dubs: My Lords, I detect a slight hint in my noble and learned friend's Answer that, if there were marches down Whitehall saying "end gender discrimination" as regards the monarchy, the Government might be persuaded to change their mind. I put a serious point to him: he has said that the heir to the throne is male and that his son is male; yes, but it would be invidious to consider legislation when Prince William is married and has children. Doing so then would be too late.

Lord Falconer of Thoroton: My Lords, as I say, there is no groundswell for change at the moment. We abhor gender discrimination. Let us not hypothesise about what may happen in the future.

Terrorism Bill

Baroness Anelay of St Johns: My Lords, I beg leave to ask a Question of which I have given private notice, namely:
	Why a document from the UN High Commissioner for Human Rights which commented on the Terrorism Bill and which the high commissioner requested be laid before the House before Second Reading of the Terrorism Bill was withheld from the House by the Home Office during the Second Reading and Committee stage of the Bill.

Baroness Scotland of Asthal: My Lords, the Government could not have published the UN commissioner's letter prior to Second Reading of the Terrorism Bill, as she requested, since she did not submit it to us until a week after Second Reading had taken place. We have published the letter under cover of a Written Ministerial Statement in time for it to be considered while the Terrorism Bill is still before your Lordships' House.

Baroness Anelay of St Johns: My Lords, in my haste to table the PNQ this morning before the deadline, I overlooked the fact that the letter was received shortly after Second Reading. The letter refers specifically to Second Reading and Committee. I note the disturbing response of noble Lords on the Benches opposite. I am asking the Government to comment on their behaviour. The noble Baroness has omitted to give a full explanation. The letter concerned a matter of the greatest public interest, it came from a source of the highest significance and it contained a specific request that it be directed to the attention of this House. Awareness of this letter would certainly have affected the way in which this House considered the Bill in Committee, by which time the Government had the letter. Will the Minister give an assurance that the Government will give positive consideration to relaxing the rules relating to Report, to enable the House to probe properly the points raised by the United Nations commissioner?

Baroness Scotland of Asthal: My Lords, I am happy to say that it will not be necessary so to do because, as the noble Baroness will see, having had the advantage of reading that letter, all the issues raised by the commissioner have been raised by Members of this House, who have the acuity to raise them themselves. Those issues were raised fully both in the other place and here.

Lord Thomas of Gresford: My Lords, the stamp on the letter indicates that it was deposited in the House of Lords Library in 2006, after the beginning of the new year. It is document number 003. I presume that it was deposited at the very beginning of this year. No notice was given, either to my noble friend Lord Goodhart or to myself, of the contents of the letter, which has come to light simply by the assiduity of the noble Baroness who has raised this Question. Why were we not given direct notice of this letter, even if it had been received after Second Reading?

Baroness Scotland of Asthal: My Lords, I hope I made it clear that the House and the other place were both given official notice of this letter by way of a Written Ministerial Statement on Monday of this week. We deposited it in the Library and we gave a response to that letter. I understand that it had been intended that the Written Ministerial Statement would be given before we broke. As a result of the illness of an official, it did not arrive until Monday, but, the matter came before the House as soon as was reasonably practicable.

Lord Elton: My Lords, it appears from the Minister's replies that the letter was germane to matters considered in Committee, that it was in the possession of the Government before the Committee met and that the letter was not made available to the Opposition or other noble Lords until after Committee. Is that the situation?

Baroness Scotland of Asthal: My Lords, the situation is that the letter was initially received by the Foreign Office. It was then transferred to the Home Office. We were already in Committee on the 5th. We debated the issue in relation to Clauses 1 and 2 on 5 and 6 December. At the time, I was not appraised of the contents of that letter, but all the issues raised by the UN commissioner were raised by Members of the House: issues of intent; issues relating to Clause 1—
	I hear noble Lords from a sedentary position saying, discourteously, "Rubbish". I assure the House that what I tell the House is an accurate representation of what happened.

Lord Foulkes of Cumnock: My Lords, will my noble friend repeat the dates that she gave in her reply? Is it not the case that the letter did not arrive until a week after Second Reading and that it was at Second Reading that the commissioner asked our attention to be drawn to it? Is it not also the case that in Committee there were no Divisions, so no irrevocable decisions have been taken, and that decisions can be made on Report? Is it not a fact which the noble Baroness ought to have admitted—that, far from the Government being called to account on the matter and far from the Minister misleading the House or deserving any criticism, she should receive an apology?

Baroness Scotland of Asthal: My Lords, the facts given by my noble friend are accurate. Of course, it is a matter for the noble Baroness whether she wishes to apologise.

Lord Goodhart: My Lords, does the Minister recognise that the views of the UN Commissioner for Human Rights, Madame Arbour, are extremely relevant to the issues that we were debating and that it would have been a considerable support to us had we been able to raise those issues during debate in Committee? Does she accept that it is plainly wrong for the Government to have failed to make the letter available before we started Committee on 5 December?

Baroness Scotland of Asthal: My Lords, I hope that I have made it clear that the Government have taken proper steps to make the letter available. It was not made available before we started at Second Reading, which is the request that was made. Your Lordships will remember that on the very first day in Committee, I made it clear, in responding to the issue of intent, that we were minded to table other amendments. Indeed, throughout the debate, I continued to assure the Committee that we were continuing to listen and that further amendments would be laid. They will be laid either today or tomorrow.

Lord Forsyth of Drumlean: My Lords, while I entirely accept that the Minister had no knowledge of this, is that not somewhat worrying? In my day as a Minister, the Bill team would have picked up a letter of this kind and a draft would have come to the Minister to write to Front Benchers informing them of what had happened. The fact that it took until the New Year to put the letter in the Library and to answer a Question suggests that there is at least something awry in the organisation of the Minister's department.

Baroness Scotland of Asthal: My Lords, the Bill team with whom I have had the privilege to work have been assiduous in their work. If there has been some misconnection, I do not say that it is as a result of a lack of diligence on their part. I hope that throughout our management of the Terrorism Bill and the other Bill, Members opposite have been given the greatest degree of facilitation and response from us on the detail.

Lord Strathclyde: My Lords, just to put the record straight on the accusation of the noble Baroness that my noble friend and I said, "Rubbish!", we did not. My noble friend said, "So what?" and I said that it was grubby. The more that I hear of this debate, the grubbier I think it is.

Baroness Scotland of Asthal: My Lords, I await the noble Lord's question.

Baroness Williams of Crosby: My Lords, I raise no epithet. Would the Minister consider that, on a Bill of this extreme importance, where the relationship between the United Kingdom Government and the United Nations High Commission for Human Rights is central to many of the Government's own principles, at the very least an explanation should be forthcoming? The Minister's explanation involved the illness of an official, but it should have been possible to warn the Front Benches of the existence of the letter and then make provisions to amend our handling of the Report stage in the way suggested by the noble Baroness, Lady Anelay.

Baroness Scotland of Asthal: My Lords, I hear what the noble Baroness says. I agree that it is of the utmost importance that we should have opportunities to consider this. But I do not feel that we have in any way been disadvantaged. The issues that were of importance—and those who have read the letter will see that what I say is accurate—have been very well canvassed in all our debates. Indeed, during the debates we indicated that we were minded—and we will be minded—to bring forward amendments. I have indicated already that we hope to be able to do that by the end of today or tomorrow. This will give plenty of time before Report for further consideration and plenty of time for those who wish to pray in aid the UN commissioner if they feel that further or other support—other than the rhetoric of noble Lords—is necessary.

Identity Cards Bill

Baroness Scotland of Asthal: My Lords, I beg to move the Motion standing in my name on the Order Paper.
	Moved, That the amendments for the Report stage be marshalled and considered in the following order:
	Clauses 1 to 3,
	Schedule 1,
	Clauses 4 to 45,
	Schedule 2.—(Baroness Scotland of Asthal.)

On Question, Motion agreed to.

Northern Ireland

Lord Rooker: My Lords, with permission, I will repeat a Statement made in the other place by the Secretary of State for Northern Ireland.
	"Northern Ireland is governed best when governed locally. Since 2002, for reasons the whole House is aware of, that has not been possible. But our commitment remains absolutely clear: this Government believe that 2006 can be the year for the restoration of the Assembly and will work to that end as a matter of the utmost priority.
	"My predecessors have all referred to critical times for Northern Ireland. And there have been many. But this year is indeed a critical one, and especially for Northern Ireland's political parties, and specifically Assembly Members: 2006 is a make or break year for them.
	"If there is no restoration of the Assembly in prospect, then two stark realities have to be faced. First, public resentment within Northern Ireland continues to build at the continued payment of Assembly Members' salaries and allowances totalling on average £85,000 per Member while Stormont stands idle. Since it was suspended in October 2002, the Assembly has cost £78 million to maintain.
	"Countless times voters in Northern Ireland have asked me: how long can this go on? I want to tell the House today: not many months more. Secondly, no Northern Ireland political leader has disagreed with me that it would be traducing democracy to have elections—for a second time—to an Assembly that does not exist.
	"Elections are due in May 2007. For those to be meaningful we must have an Assembly exercising its full responsibilities. We therefore need to make progress urgently. We cannot let things drift.
	"Members of the Legislative Assembly were elected to be active members of a legislative assembly, working for their constituents in that Assembly. They have a duty to do so.
	"I want to see them discharging their responsibilities to their electors to govern on the shared basis the voters of Northern Ireland gave a mandate for in the 1998 referendum.
	"Of course this means building greater trust to deliver on commitments already made on all sides. Unionists and nationalists need to know that republicans are committed to exclusively lawful means. They need to know that all paramilitary activity, including criminality, has ended. The Independent Monitoring Commission is the body that will make an assessment. They also need to know that there is unequivocal support for the Police Service of Northern Ireland and the rule of law. And republicans and nationalists have to know that unionists are fully committed to fair and equitable power sharing.
	"But if people are serious about seeing a shared future based on fairness and equality, they must persuade each other of that.
	"I am therefore asking each of the political parties to agree dates for substantial discussions in early February with the British and Irish Governments to give their views on the way forward to restore the political institutions.
	"The Prime Minister, together with the Taoiseach, will be closely involved with developments during the year.
	"I also wish to inform the House about the Government's intentions as regards the Northern Ireland (Offences) Bill.
	"When I moved the Second Reading on 23 November, I said that it was necessary to help bring about closure to Northern Ireland's dark past of violence by resolving outstanding issues that had not been dealt with in the Belfast agreement, primarily that of terrorist suspects on the run. Following the agreement, over 400 paramilitary prisoners were released on licence.
	"Although victims of atrocities were, understandably, in uproar at the sight of murderers and former terrorists walking free, it was the right thing to do to seal the agreement and lock in the peace.
	"But it left unresolved an equally difficult matter: the issue of what to do about those who had committed terrorist offences before 10 April 1998 and who, had they been in prison at the material time, would have been part of the early release scheme. And it also left the question of what to do about others who might be prosecuted in future for crimes committed during the troubles before the Good Friday agreement.
	"The Northern Ireland (Offences) Bill is a challenge to everyone to look to the future, not to be trapped in the past and that challenge remains.
	"But, as I told the House then, I did not bring forward this legislation with a spring in my step because I knew how hard it was for those thousands of victims who had lost so much.
	"I knew that introducing this legislation would be difficult and uncomfortable: I neither sought nor expected the sympathy of the House for that.
	"Members of the House, particularly those from Northern Ireland, expressed their opposition to this Bill with great power and passion. In detailed discussion in Committee over many hours, those concerns were amplified with real commitment by Members across the Committee.
	"That passion was expressed no less powerfully outside the House in meetings that I and the honourable Member for Delyn had with victims groups.
	"In response to the arguments put to us in Committee, we have been drafting wide-ranging amendments to the Bill—including ensuring that defendants would have to appear before the Special Tribunal. And we were giving serious consideration to a time limit for the scheme.
	"The Government still feel that it was right to introduce this legislation, not least to honour the commitment made publicly by both the British and Irish Governments in 2003, a commitment that was a key building block in the process which saw the IRA end their armed campaign.
	"The Government could have proceeded with this Bill when the issue was first raised seven years ago. We could have done so when the Joint Declaration was made in 2003. But we did not because the IRA had not delivered on its promise to end its war. We waited until that happened.
	"Every Northern Ireland party vigorously opposed the Bill—bar Sinn Fein. Now Sinn Fein is opposed because it refuses to accept that this legislation should apply to members of the security forces charged with terrorism-related offences.
	"To exclude any members of the security forces who might have been involved in such offences from the provisions of the Bill would not only have been illogical, it would have been indefensible and we would not do it. Closure on the past cannot be one-sided. That was, is, and remains non-negotiable. The process would have made people accountable for their past actions through the Special Tribunal before being released on licence.
	"Sinn Fein has now said that any republican potentially covered by the legislation should have nothing to do with it. But if nobody goes through the process, victims, who would have suffered the pain of having to come to terms with this legislation, would have done so for nothing. That is unacceptable, and I am therefore withdrawing the Bill.
	"When I introduced this Bill I said that I would not presume to tell any victim that they must draw a line under the past. But the Government remain of the view that this anomaly will need at some stage to be faced as part of the process of moving forward. It is regrettable that Northern Ireland is not yet ready to do so.
	"We will reflect carefully over the coming months on how to move forward on this issue in the context of dealing with the legacy of the past. We will not rush to conclusions. I will take stock in the autumn.
	"In reflecting, we will be mindful of the views of all the political parties, the Select Committee on Northern Ireland Affairs, victims' groups and others. We are coming to the endgame of a long period of transition that began with the ceasefires of the early 1990s. As I have said before, the endgame in conflict transformation is often the hardest part, as it has proved in this case. But 2006 can and must be a year of historic progress in Northern Ireland. It must be a year in which we will see a devolved, power-sharing executive of local politicians taking the decisions that affect the everyday lives of the people of Northern Ireland. That goal should unite all Members of this House".
	My Lords, that completes the Statement.

Lord Glentoran: My Lords, I thank the noble Lord, for repeating the Statement made by the Secretary of State in another place. We welcome, completely and wholeheartedly, the withdrawal of this Bill. In response to the Secretary of State's plea for help from the Opposition on Northern Ireland affairs during the Christmas Recess, I can assure the noble Lord that normal service will be returned.
	Her Majesty's Government succeeded in creating an all-party consensus against the Bill. According to today's Belfast Telegraph, 63 per cent of the Northern Ireland public considered it unacceptable. We congratulate Her Majesty's Government on joining that consensus.
	The Secretary of State is asking all parties to substantial discussions about a way forward. I suggest that progress for a successful outcome depends on a few key issues. The first is the rebuilding of a very fractured trust among all parties. Having heard the debate in the other place, I know that my honourable friend David Lidington and the Secretary of State are in agreement over most of that. It has to be remembered that this will not happen overnight. Secondly, an end to all violence and criminality is vital. Again, that cannot be judged by one, or even two, reports from the IMC. The monitoring process has to be continuous.
	The issues that the Northern Ireland (Offences) Bill sought to address still need resolving, as the Secretary of State has said. Does the noble Lord accept, on behalf of the Secretary of State, that one of the most serious criticisms of this Bill is the lack of sensitivity towards the victims and their families? Will the noble Lord assure the House that, when Her Majesty's Government return to this issue in the future, the interests of victims will be paramount?
	The third issue is that full support for the PSNI and the criminal justice processes from all parties is absolutely vital.
	Reflecting forward, we have consistently supported devolution. We support the Secretary of State's desire to see all institutions up and running before the 2007 elections. We do not wish to continue governing Northern Ireland by statutory instruments from your Lordships' House and the other place which, to all of us, is foreign and we feel that we are unable to fulfil the true democratic role. However, as per the Good Friday agreement, we must be certain that the commitment to peaceful and democratic means is permanent and irreversible before the final endgame, referred to by the Secretary of State, can be played.

Lord Smith of Clifton: My Lords, I, too, thank the Minister for repeating the Statement. We welcome both parts of the Statement: the first, slightly less important but nevertheless significant part concerns the continuing payment of the Members of the Assembly. Since the Assembly was suspended in 2002, your Lordships will know that I have regularly raised the question of continuing to pay salaries to MLAs. The Government were very reluctant to contemplate that, even arguing that they were still carrying out constituency duties and, even more questionable, that there was a need to sustain a political elite. Later, there was a token deduction and Mr Paul Murphy, the then Secretary of State, muttered about the problem of payment, which was echoed by the Prime Minister.
	I very much hope that the Statement today means that there will be no more prevarication or procrastination, no more huffing and puffing. If the devolved institutions are not up and running soon, MLA salaries should be stopped. That is explicit in the Statement, although it is too vague in saying that payment should continue for "not many more months". That is far too imprecise. Does the Minister agree that it would be better to set a specific date, say 31 May, after which remuneration will cease? Later than that, the marching season will be looming and that is always used as an excuse for a delay. Will the Government consider a specific date?
	As I remarked the last time that MLA payment was raised in your Lordships' House, the prospect of its withdrawal may well be a spur to interparty agreement to collaborate. The fear of such loss is one of the many things that unites Northern Ireland political parties across the community divide. We all wish for a quick restoration of the devolutionary settlement.
	We on these Benches—and I would guess, the whole House—are mightily relieved that the Secretary of State has decided to withdraw the Northern Ireland (Offences) Bill. It was welcomed by none. It solved nothing and antagonised most public opinion for one reason or another across the political spectrum in Northern Ireland. The idea that a superannuated judge should preside over some sort of process involving alleged suspects, or those actually charged but on the run, or those convicted but who had escaped, who did not even have to appear before him or her, was a parody. It was an attempt to put some kind of figleaf legitimacy on what for all intents and purposes was a pardon by executive action. Such a notion was doomed to failure from the very start, but it could form the basis of a modern-day Gilbert and Sullivan operetta. We are pleased that the Government have withdrawn the Bill and congratulate them on bowing to the inevitable.
	In conclusion, I have two other questions for the Minister. Will he undertake that, in any future discussions on solving the problem of on-the-runs, both Governments will have all-inclusive talks with all the Northern Ireland political parties and not just do a side deal with Sinn Fein? This matter will only be resolved by an open "treaty" openly arrived that.
	Secondly, will the Secretary of State consider that a fundamental part of moving Northern Ireland forwards is the shared future agenda? Last February, the then Secretary of State made a commitment to the other place to publish the first of the triennial action plans for a shared future in the autumn of 2005. When can we expect the plan to be published? Why are the Government failing to make improved community relations a priority?

Lord Rooker: My Lords, I am extremely grateful for the responses of both noble Lords, as indeed I was, on behalf of the Secretary of State, for the responses of the parties in the other place. There is not much more that I can say in addition to the Statement. Let us be clear: the Bill is dead. It will not be coming back. That does not mean that the issue goes away, which was recognised in both comments. This issue will have to be dealt with at some point in a legislative form. It is not something that can be done behind closed doors or by executive action, but the Bill is effectively dead.
	On the issue of victims' needs being paramount, as the Secretary of State said in the Statement, we knew that this would cause great upset to the victims and they made that abundantly clear, both to the Secretary of State and other Ministers. Therefore, we want to give careful thought to the issue. There is no deadline. The Secretary of State said that he would take stock in the autumn. Although there is no deadline, the issue will not go away and we want to make that absolutely clear. There needs to be a wider consensus and there must be a rebuilding of trust, which is implicit in the Statement, from both sides of the community.
	There must also be the acceptance by Assembly Members and putative Ministers of support for the police and the rule of law. This is a black-and-white issue: if you do not support the police and the rule of law, you are actually supporting criminals, rapists, muggers, thieves and embezzlers—that is the implication. You cannot expect to be in government in that situation, so that is implicit. There are other parts of the process to be carried through, and we understand that there are further devolutionary moves ahead. We want to make it absolutely clear that there is no walking back from them.
	In reply to the noble Lord, Lord Smith of Clifton, there are no dates. To be honest, it would not have been helpful if the Secretary of State or the Government had said today that we will need to get an agreement, or that MLAs will lose their salaries, or that we will need the Assembly up and running, all by a certain date. We have made it clear about 2006; we have also made it clear—I think the consensus among all the party leaders is—that the elections that would normally take place in 2007 will not take place if the Assembly is not up and running in 2006. There must be a process for stopping those elections and that, as has been made clear, cannot be left until the last minute. So putting in a date of any kind at present would not act as a spur; in fact, it could have almost the opposite effect.
	The issue of the on-the-runs is, as I have said, one that we will have to think about and take stock of in the autumn. It is not a question of having no discussions, but there cannot be any side deals. The deal which was already done was reneged on by the one political party that had asked for the legislation. It wanted it and supported it, but it has reneged on it because it did not like it being double-sided; that is the bottom line here. It wanted one-sided treatment, which we are not prepared to accept. We have made that absolutely clear in the Statement.

Lord Rogan: My Lords, I thank the Minister for his Statement to the House this afternoon, and I greatly welcome it. Today, the law-abiding people of Northern Ireland have received a late but much welcome Christmas present, with the Government not now proceeding with the Northern Ireland (Offences) Bill, or the on-the-run legislation. I am delighted that the Minister has at last seen sense and withdrawn that odious Bill, but it is a sad reflection that it took Sinn Fein/IRA to say that the republicans would have nothing to do with that evil Bill before the Minister would agree to withdraw it.
	An evil, but necessary Bill: those are words used by the noble Lord, Lord Rooker, when he described and sought to justify that legislation to the people of Northern Ireland. I agree that the Bill was evil but totally disagree that it was necessary. That grotesque legislation should never have been brought before the House in the first place. It was seen by the victims of Sinn Fein/IRA violence and terrorism as yet another sop to republicanism. In welcoming the withdrawal of this Bill, I trust that these proposals or similar will not be introduced by the Government in another format in the future to placate republicans.

Lord Rooker: My Lords, I welcome that welcome for the Statement, although I reject some of the noble Lord's points. I do not wish to have an argument with him this afternoon. The Bill came as a surprise to no one; it was foreshadowed in writing in 2003, in public documents. Everybody knew what would happen if and when the IRA finally gave up the war. It was part of a commitment which the Government entered into and fulfilled. There is no consensus on the Bill and, indeed, the prospect of the victims getting nothing out of the Bill was one clincher in its withdrawal.

Lord Tebbit: My Lords, is the Minister aware that I was slightly surprised by the frankness of the Secretary of State when he admitted in a radio interview that the Bill had been brought forward as a result of a commitment made to the government of the Republic and to IRA/Sinn Fein? Is he aware that I am, if anything, rather more surprised that the Secretary of State has admitted today that it has been vetoed by the IRA? A Government who would not accept the misgivings that were expressed in the other place, and were perhaps fearful of what might happen to the Bill here, have now allowed a terrorist organisation to veto a Bill which the noble Lord himself described as "necessary".

Lord Rooker: My Lords, the noble Lord, Lord Rogan, obviously heard the interview. I said that the Bill was evil but necessary—I did not call it a necessary evil. I thought "evil but necessary" was a worse condemnation. But the issue will not go away. The Bill was necessary; we have decided it would not suit the purpose in the form it was drafted because it would not be used, but the issue will not go away. I have to disabuse noble Lords of the idea that because the Bill has been withdrawn the issue is put to bed and nothing needs to be done in the future.
	The noble Lord, Lord Tebbit, said that he was surprised at the Secretary of State's frankness. He was frank. Sinn Fein wanted a one-sided arrangement; Sinn Fein was not being offered a one-sided arrangement and it will not be offered a one-sided arrangement. As both I and the Secretary of State said, what Sinn Fein decides about what happens to members of the security forces is not negotiable.

Lord Shutt of Greetland: My Lords, in thanking the Minister for his frankness, I wonder whether he could be franker still and answer this point. I believe that one of the problems is that this issue was agreed in the margins of Weston Park and eventually entered the public domain. There has been tremendous concern because it was not full frontal, as it were, in the first place. This has been a very serious feature of the issue. Can the Minister be frank and say that nothing else is lurking around the margins of Weston Park that still has to be outed?

Lord Rooker: My Lords, I have repeated a Statement made by the Secretary of State. That is it. The Northern Ireland (Offences) Bill dealt with specific issues about on-the-runs. The noble Lord is quite right: it was not part of the Good Friday agreement, as people have wrongly claimed, but it was not a surprise. A public document was published in 2003 which set out what would happen if a sequence of events occurred—that is, the abandonment of the war by the IRA. I cannot go beyond that, because that is what this issue is about.

Lord Maginnis of Drumglass: My Lords—

Lord Dubs: My Lords—

Baroness Farrington of Ribbleton: My Lords, it is the turn of my noble friend Lord Dubs. I ask people to make their questions as brief as possible, as many noble Lords wish to speak.

Lord Dubs: My Lords, if the Assembly is not restored before the pay of Members of the Assembly comes to an end, what will happen to the staff who work at the Assembly and service its committees? Will they still be kept on so that if the tide turns and the Assembly is restored, things can move very quickly?

Lord Rooker: My Lords, I assume that my noble friend is referring to the staff of the Assembly, not the staff of Assembly Members. I do not know the figures off the top of my head, but many members of staff at the Assembly are working within the government service of Northern Ireland. It is not as though they are sitting in Stormont twiddling their fingers—they are all doing useful jobs. I occasionally come across people in various of the departments for which we, as direct rule Ministers, are responsible, who indicate that their full-time job is at the Assembly if and when it is up and running. That issue will be dealt with and I do not think there need be any fear regarding the staff of the Assembly.

Lord Steinberg: My Lords, I am sure everybody is relieved to hear the Statement, and I am grateful for it. My noble friend Lord Glentoran has said what we feel. I do not want to talk about the end-game or say that I am relieved that the Bill has been withdrawn—I want to ask where we go from here. It has already been mentioned that the Police Service of Northern Ireland must receive complete and unequivocal support from all political parties in Northern Ireland. I should be grateful for confirmation of that.
	Where we go from here, in talking about the end-game, draws me on to the subject of the considerable criminality, which, perhaps as a result of the lack of political movement, is greater now in Northern Ireland than it has been for some years. As noble Lords are probably well aware, we are not getting the dramatic explosions and shootings of soldiers—thank God. But we are getting a growing criminality cult, which makes it even more important that the Police Service of Northern Ireland is fully supported.
	Finally, because the people of Northern Ireland have had such a difficult time for so many years, does the Minister recognise that the act of decommissioning could have been done in a better and more straightforward way, as it caused for people in Northern Ireland and elsewhere a concern that it had not been done in a completely open way?

Lord Rooker: My Lords, I am most grateful to the noble Lord for his questions, and the positive nature of them. It is a question of moving forward. Whatever the issue relating to Northern Ireland, all the parties around the table must feel that they have a share of the success. The language of victory and defeat has got to go, and they must come to the table and be at the table thinking, "We've got a piece of success". If they can all start thinking that, we can actually move forward to a much brighter future.
	On some of the issues that the noble Lord raised, I cannot go beyond what I said about the need for support for the police and the rule of law, because I would be qualifying what I said—and I think I expressed myself as strongly as I possibly could. I have not come with the figures, but I would probably dispute—and I think that the Chief Constable would probably dispute—what the noble Lord said about levels of crime. I have listened to interviews with the Chief Constable recently. He did a fairly long radio interview—I believe that it was on the "Today" programme—just before Christmas. Massive progress is being made by the Police Service of Northern Ireland in getting into areas where it would not traditionally have been, where officers have been able to police in a way that traditionally they have not been able to. I heard that they have been on bicycles—although I understand that that can be a problem sometimes even for policing in GB. But I shall seek to get an up-to-date position from the Chief Constable, and I shall make sure that a note is placed in the Library. I cannot dispute the generality of the noble Lord's remarks without the figures, but I understand from listening to the Chief Constable that the position is not as bad as the noble Lord said.

Lord Maginnis of Drumglass: My Lords, so great is the relief at the withdrawal of the Northern Ireland (Offences) Bill that it may have been overlooked that the Government have disguised the enormity of their action in withdrawing that odious Bill by somehow implying a denigration of MLAs. The two issues should not have been confused in the Statement. The MLAs are the electorate's contact with what passes for democracy in Northern Ireland—a great deal more so than those who are in the Northern Ireland Office.
	I listened to the Secretary of State respond to questions in another place, and I am more than perplexed by his suggestion that the withdrawal of the Bill leaves members of the security forces vulnerable—that there is now no "off the hook" facility for members of the security forces. As a serving officer for many years, I was circumscribed by rules; if I had ever broken them, I should have been unworthy of my commission and would have expected to be punished. But I want to know that genuine mistakes made by soldiers and police officers in the heat of a fire fight or contact over more than 20 years from 1970 to 1994 will not be made answerable in the context of the normal circumstances that largely exist today. Can the Minister reassure me on that point?

Lord Rooker: To be honest, my Lords, that last question gives the game away. This is the whole point. If members of the security forces, without any protection from the kind of plan in this Bill, subject to normal military and legal procedures, were prosecuted for something that happened in the exact circumstances described by the noble Lord, and were found guilty by a court and sent to prison when the terrorists have taken advantage of the situation, think how it would feel. If the noble Lord was listening, the Secretary of State gave this as an example of why we do not want one-sided treatment. That is the whole point of the exercise, and of course it is the sticking point for Sinn Fein.
	I pay tribute to anyone who has served in Northern Ireland, politically or militarily, and nothing I say knocks that, but no one can say the Government are disguising what we are doing, having made a Statement in the House of Commons and in this place as to what our intentions are. I shall deal with the two issues arising from what the noble Lord said. First, we are trying to deal with getting forward on the issue of the on-the-runs, because it will not go away. It certainly will not go away for the security forces, as has been said by the noble Lord, by direct and explicit example.
	Secondly, we have to deal with the issue of the institutions in Northern Ireland. I agree that part-time commuting direct-rule Ministers looking after more than one department is at least second best compared to local politicians. The MLAs are elected, but they are not doing anything. They are writing letters to Ministers and going on delegations, but they are not legislating. They are not holding Ministers to account, because we are not going to account to MLAs: we are accountable to this place and to the other place. It is almost pretend politics. We want them to be a fully effective legislative assembly, controlling local politicians who are operating as Ministers, taking decisions on behalf of the people of Northern Ireland, and we want that as soon as possible.

Lord Mayhew of Twysden: My Lords, I go back to a remark by the Minister a few minutes ago. He said that Sinn Fein had reneged on the agreement it had with the two Governments and from which this Bill derived. Is it the case that from the very beginning it was made clear to Sinn Fein that the Bill would offer the same relief, if that is the right word, to security forces that was offered to the on-the-runs? In the light of the anguish suffered by the victims at the prospect of this Bill, which the Statement speaks of very eloquently, would it not have been a good deal better for all the implications of the Bill to have been thoroughly sorted out, established and nailed down before the Bill was ever introduced?

Lord Rooker: My Lords, the noble and learned Lord asks a quite specific and very relevant question, to which, to be honest, I do not know the answer. These decisions and agreements were made probably two, maybe three Secretaries of State ago. Everyone knows about the public document published in 2003; it has been in the Library and in public circulation. The Northern Ireland (Offences) Bill was based upon that. The decision was taken to ensure that there was no one-sided treatment, and therefore the security forces were included. At what point that occurred, I simply do not know.

Lord Alton of Liverpool: My Lords, is there not a danger that the Government will be in a position where they are damned if they do and damned if they don't? Many of us should be grateful to both the Secretary of State and the Minister for the wisdom they have exercised in making this move today. Is the Minister not right to point us towards the long-term problem that remains? Looking at models elsewhere in the world that have dealt with justice and truth, does he agree that we need to try to create some sort of mechanism where people can own up to the things they have done in the past involving terror, murder, the deaths of thousands of people and the injuries of tens of thousands more—the victims who have been mentioned in your Lordships' House today? On both sides of the divide, with loyalist groups as well now talking about disengagement from the violent process, we need to put something in place where people can own up to the past, wipe the slate clean and move on into the kind of democratic politics the Minister has outlined.

Lord Rooker: My Lords, the answer is yes. We have to find a better way than has been found so far of building and cementing trust between the two communities.

Lord King of Bridgwater: My Lords, will the Minister recognise that his Statement today does nothing to improve the confidence of many of us, who are increasingly worried by the way in which the Government have been handling the situations in the Province, and whether they really have been giving equal recognition to the interests of both communities, rather than what seems a predominance of influence available to Sinn Fein in recent times? I am much heartened by what he said. It could hardly have been a stronger statement of the need for recognition of the Police Service of Northern Ireland and the rule of law. I only hope that now, at last, the Government will stand on this point and not make yet further concessions in their desperate search for an agreement.

Lord Rooker: My Lords, I respect greatly the role of the noble Lord in his former position, but I am quite clear that there has not been a lot of end-game influence by Sinn Fein, if I could put it that way, because it did not get what it wanted.

Lord Laird: My Lords, is the Minister aware that unionists are concerned about going into an executive at Stormont with Sinn Fein? They fear that after a few months they might discover that they have gone into government with MI5. The noble Lord indicated in his Statement that republicans should be committed to exclusively lawful means. Does he mean that they must put an end to laundering criminally gained money and give up the property and businesses that the IRA owns in Dublin, Manchester, Blackpool, Liverpool and the Channel Islands, to mention but a few areas?

Lord Rooker: My Lords, I meant what I said in the Statement—exclusively democratic and peaceful means. We shall receive a report from the International Monitoring Commission this month or early next month—I do not know the date—which will cover these issues of criminality.

Baroness Park of Monmouth: My Lords, needless to say I greatly welcome the fact that this Bill is temporarily dead, although I am concerned that the Statement suggests that other ways are still to be found of solving what the Government regard as the problem of the OTRs. What is happening about the victims commissioner who was supposed to be set up as part of this legislation? Does he exist and has he got a budget?

Lord Rooker: My Lords, the victims commissioner does exist. The appointment was announced towards the end of last year—it was Mrs McDougall, I think. There is not an issue here. The victims commissioner is not dependent on this Bill. This was not a quid pro quo, it was another strand of the changes. The victims commissioner has been appointed and no budget that is set aside for the victims commissioner will be affected by the withdrawal of this Bill. I can give an absolute assurance on that.

Business

Lord Grocott: My Lords, before we start the Second Reading, perhaps I may appeal to the self-regulatory spirit of the House by saying that we have two Second Readings which have attracted 37 speakers between them. Obviously, when the Second Readings were scheduled we did not know that there would be either a Statement or a PNQ; nor, frankly, did we know how many people would put their names down to speak on either of the Second Readings. If Back-Bench contributions were around nine minutes on each Bill we would meet our recommended finishing time of 10 o'clock.
	I would make a particular appeal on this because the House will recall that the London Olympic Games and Paralympic Games Bill was scheduled for just before the Christmas break. We withdrew it in the spirit of the House, simply because the previous business had over-run. It would be very unfortunate indeed if we found ourselves under tremendous pressure and started late on the London Olympics Bill, which would happen if we were unable to keep to around nine minutes for the first Bill, the Company Law Reform Bill.

Company Law Reform Bill [HL]

Lord Sainsbury of Turville: My Lords, I beg to move that this Bill be now read a second time.
	One hundred and fifty years ago, my predecessor Robert Lowe, later the first Viscount Sherbrooke, brought forward the Bill that created the joint stock limited liability company. It was the first nationwide codification of company law in the world, and he has recently been described as the father of modern company law. Our company law continues to have an excellent record. Since 1997 new incorporations have risen by over 60 per cent and the number of foreign firms incorporating in the UK has more than quadrupled. No doubt this is because, according to the World Bank's assessment, it is quicker and cheaper for companies to set up in the UK than in any other EU member state.
	We think that improvements can still be made. Companies operate internationally and recent legal judgments make cross-border incorporations easier. Overseas owners hold around a third of the stock in listed UK companies—more than twice the level in 1993. If we want these owners to continue to invest in UK companies, we need them to retain their confidence in our system of corporate governance.
	Over the past half century, a number of significant Companies Acts have been introduced by governments from all parts of the political spectrum, often following on from the deliberations of an expert committee. The first post-war legislation—the Companies Act 1947—implemented the Cohen report of 1945 and, among other things, proposed the requirement that a company's accounts represent a "true and fair view" of the state of affairs of the company.
	The Companies Act 1967 introduced, among other things, the requirement for all companies to file accounts with Companies House. Shorter Acts followed: in 1976, dealing with accounts and audit; in 1980, implementing the distinction between public and private companies; and, in 1981, making detailed provisions on the form and content of company accounts and implementing a European directive in this area.
	The 750 sections of the consolidating 1985 Act remain of course the centrepiece of our current law. This was followed in 1986 by the Financial Services Act, marking the beginning of a separate branch of legislation for securities, and by the Companies Act 1989, which implemented the EC's Eighth Company Law Directive on group accounts and the EC's Eighth Company Law Directive on the qualifications of auditors.
	I hope that that short and partial review of the past makes clear the need constantly to update our company law in response to changes in the way that companies do business and how that is often best done, as in this Bill, based on a previous review by independent experts and taken forward largely on a cross-party basis. I hope that we can, as far as possible, continue that tradition. That said, I do not think that the Bill is merely business as usual. In its clear focus on simplification, on the needs of small businesses, which are so important to our economy, and on deregulation, I believe it represents a break with the past.
	The Bill has been drawn up in a unique partnership with business. In 1998, we commissioned the Company Law Review—an independent group of experts, practitioners and business people—to take a fundamental look at our system of company law. The review conducted a thorough and authoritative assessment of the changes that need to be made and is the essential blueprint for the reforms we now propose.
	The review was followed by two White Papers, in 2002 and 2005, and by further consultation on specific proposals. The Bill includes significant deregulatory change and, based on the information we have had from stakeholders, we estimate that it will produce savings for business of around £250 million a year, of which £100 million a year will benefit small business. That includes: significant savings relating to moves away from paper communications towards electronic communications, which could be close to £50 million per year for FTSE-listed companies alone; benefits for many companies, particularly smaller private ones, of simplifications to the way they take their decisions, including, for example, removing the requirement for them to hold annual general meetings and a move towards greater use of written resolutions with savings perhaps in the range of £25 million to £100 million a year; greater clarification provided by the Bill on directors' duties; and the general savings to companies, their advisers and all users of the law from redrafting it and providing a clearer structure and language.
	It is also important to emphasise the less easily quantifiable, but no less real, economic benefits which we believe could arise for all companies and for the economy as a whole from the enhancements to corporate governance, shareholder engagement and the modernisation of decision-making processes that the Bill introduces.
	The Bill repeals about two-thirds of the Companies Acts 1985 and 1989, including all the provisions most frequently used by small companies. The legislation has been reordered and redrafted in clearer language to make it much easier for companies of whatever size to understand the requirements on them. I hope that noble Lords will be able to join me in complimenting parliamentary counsel on the clarity of the drafting, which has been favourably commented on by a number of those whom we have consulted.
	Noble Lords may ask why the Bill is not a complete consolidation of existing company law. That is largely a case of reflecting the views of those whom we consulted. They told us that they wanted to see restatement of the areas which were of day-to-day relevance but not to see provisions reworked for the sake of it.
	On capital maintenance, for example, which is a large chunk of what remains in the 1985 Act, we are pressing for fundamental reform in the EU. To restate in advance of that would not be helpful for users, although the Bill does make some useful specific changes. In practice, we are told that, when referring to company law, users use publications such as Butterworths, which shows the Acts as amended and includes relevant statutory instruments and, indeed, financial services legislation.

Lord Clinton-Davis: My Lords, as the Minister knows, I am in favour of some degree of consolidation at this stage. However, the logic of what he says is that we will have to wait for a very long time before consolidation can take effect. For that reason, would he reconsider consolidation now? It is always possible to come back later with further measures.

Lord Sainsbury of Turville: My Lords, as I was saying, this is not what we have been asked to, and not what business and lawyers want us to do. In any case, if we were to consolidate all company law, we would shortly be faced with a situation on capital maintenance which would involve another Bill, and it would no longer be consolidated. It is simply not possible to have a consolidated Bill which holds for a lengthy period of time and, as I said, it is neither desirable nor necessary, nor what people want.
	The Company Law Reform Bill has four key objectives: enhancing shareholder engagement and a long-term investment culture; ensuring better regulation and a "think small first" approach; making it easier to set up and run a company; and providing flexibility for the future.
	Better regulation is at the heart of the Bill. As it stands, our company law was originally designed for large companies with numerous public investors, but over 90 per cent of companies have five shareholders or fewer. We have lifted from private companies the burden of unnecessary provisions and drafted the provisions they use most often in a more accessible way. We will also ensure that small companies and their advisers have easy access to plain English guidance on what they need to know about the law.
	The Bill follows the important principle, established by our predecessors, of enabling shareholders to be the primary regulators of corporate behaviour rather than the state. Companies exist for the benefit of all their members collectively and need the freedom and flexibility to create wealth. Corporate law and governance must be designed to encourage and enable companies to create the internal structures and controls that will promote trust and transparency, and lead to better performance.
	The Bill is part of a wider programme of government and business-led reform. In 2002, we launched a review by Sir Derek Higgs on non-executive directors, which led to an updating of the Combined Code on Corporate Governance. That year we also introduced regulations to require quoted companies to put the directors' remuneration report to a shareholders' vote. The Companies (Audit, Investigations and Community Enterprise) Act 2004 ensured better oversight and stronger regulation of the accounting and audit profession, strengthened powers to investigate companies and created the framework for community interest companies. We have also raised the audit thresholds, so that some 69,000 companies no longer have to have their accounts professionally audited.
	I now come to the Bill itself, which is 885 clauses long, partly because of its simplicity, with shorter, clearer clauses. If the Opposition think that this is not a matter of great interest to small companies and businesses—to have the document in a clear, simple form with short clauses—they do not understand what business is about. I should add, in the light of a claim by Conservatives this morning, that the Bill is not deregulatory because it contains 885 clauses but repeals only 642 clauses of previous Company Acts that there must be more intelligent ways of measuring the financial impact of a piece of legislation than simply counting the clauses.
	As I have shown, the Bill significantly reduces the financial burdens on industry. Also to say in the same press release that a Bill which covers such issues as directors' duties, the limitation of auditors' liabilities, shareholders' rights and the provision of a statutory footing for the Takeover Panel is a mouse of a Bill suggests to me not so much that the Conservative Party is standing up to business as that it is losing touch with it and with reality. These are extremely important issues; they are known to be important issues to business. To describe this as a mouse of a Bill is simply to lose touch with the real world. The Bill is long and I hope that the law will be clearer as a result. I shall summarise some of the key elements.
	Parts 1 to 7 of the Bill deal with the fundamentals of what a company is; how it can be formed; and what it can be called. These clauses remove any obstacles to "electronic incorporation". The Bill enables the Secretary of State to set out default model articles for different descriptions of companies. We published draft default articles for private companies in our 2005 White Paper. They are radically simplified to reflect the way in which small companies operate. This approach was developed with the involvement of small companies.
	Part 9 will ensure that companies can enable indirect investors to exercise certain governance rights. Investors today increasingly hold their shares in listed companies through intermediaries—for example, through nominee holdings—and thus rely on contractual arrangements both to obtain information and to give any instructions about how they wish shares to be voted. These provisions are intended to ensure that companies can extend certain rights of members to investors holding through intermediaries. They also provide a power to make regulations to compel companies to provide information to those nominated by a member, subject to consideration of possible costs and benefits.
	Part 10 introduces a statutory statement of directors' general duties. The statutory statement reflects the recommendations of the Law Commission, the Scottish Law Commission and the company law review, and it will provide much greater clarity on what is expected of directors. I shall highlight two points. The statutory statement is, for the most part, a codification of the current law and preserves the existing civil consequences of breach of the duties. The duties are owed to the company rather than to shareholders individually or to other stakeholders.
	The duty to promote the success of the company answers one of the fundamental questions in company law: "in whose interests should companies be run?". In line with the recommendation of the company law review, the Bill's answer is that directors should run the company for the benefit of its members collectively. However, directors will not be successful in promoting the success of the company if they focus on only the short-term financial bottom line. Successful companies see business prosperity and responsible business behaviour as two sides of the same coin. That is why, in line with the recommendation of the company law review, the Bill adopts an approach known as "enlightened shareholder value", under which a director must, in promoting the success of the company, have regard to factors such as the long-term consequences of business decisions and the impact of the company's activities on employees, the community and the environment.
	The duty to exercise reasonable care, skill and diligence mirrors the tests laid down in Section 214 of the Insolvency Act 1986. As such, it reflects the judicial development of this duty in recent years and includes an objective assessment of a director's conduct.
	The duties relating to directors' conflicts of interest introduce two changes to the very strict principle in the current law that directors must not place themselves in a position in which there is a conflict between their duties to the company and their personal interests or duties to others: first, transactions between a director and the company will not have to be authorised by either the members or the board, but will instead need to be declared to the other directors; secondly, board authorisation will be permitted in respect of most conflicts of interest arising from third-party dealings by the director.
	Chapter 8 of this part implements the company law review's recommendation that it should be possible for any director to have his home address protected. It will no longer be necessary first to show risk of violence or intimidation.
	Part 11 describes the mechanism by which members may enforce directors' general duties on behalf of the company. It implements the recommendation of the Law Commission that there should be more modern, flexible and accessible criteria for determining whether a shareholder can pursue such an action.
	Part 12 removes the requirement on private companies to appoint a company secretary. Some such companies may wish to keep a secretary; this will be for them to decide.
	The provisions in Part 13 on company decision-taking are an example of our "think small first" approach. The key changes are that the Bill is drafted on the basis that private companies will not need to hold annual general meetings (AGMs); it will be easier for private companies to take decisions by letter, e-mail or other electronic means; the law will extend shareholders' rights to appoint proxies; shareholders of public companies will have the right to have AGM resolutions circulated at the company's expense if tabled before a certain date; and shareholders of quoted companies will have the right to request an independent report on a polled vote.
	Parts 15 and 16 cover the accountability of officers to members. The provisions on reports and accounts have been reordered and redrafted to make it easier for companies of whatever size to find the requirements relevant to them.
	Noble Lords will be aware that, since the Bill was introduced, the Chancellor has announced the Government's intention to repeal the operating and financial review provisions that apply to quoted companies, and amending regulations were laid on 15 December. These companies will need to comply with the requirements for a business review, which are in most respects very similar. I must stress that our commitment is as strong as ever to improving strategic, forward-looking narrative reporting by companies and to enhanced dialogue with shareholders based on such reporting.
	We intend to table appropriate amendments to the Bill to reflect this change of approach. Before doing so, we have invited comments on whether any particular requirements of the business review need to be clarified to achieve more effectively the Government's objectives regarding the business review and on any other considerations that we should consider in deciding how to frame suitable amendments for the Company Law Reform Bill on these matters. Some companies are considering whether to publish an OFR on a voluntary basis or to provide voluntary supplements to the business review in order to provide all the information for shareholders and others in one place. We welcome an approach that further increases transparency and the information available to shareholders.
	The business review requirements should also be seen against the background of the new statutory statement of directors' duties in the Bill. Views have been invited by 15 February and we intend to take them into account before bringing forward amendments to these provisions.
	Part 16 brings together and clarifies the existing provisions on auditing and adds a number of important new provisions. It will enable a company and its auditor to agree a limitation on the latter's liability, which has until now been prohibited. A limitation will require shareholders' approval, and must be fair and reasonable. If not, it can be challenged and the court may substitute its own limitation. There is a new offence for those who knowingly or recklessly cause misleading, false or deceptive audit reports to be made.
	In response to concerns expressed by some of those we consulted, we have taken the opportunity to reinforce, in Parts 15 and 16, the "true and fair" principle that underpins the preparation and auditing of all company accounts. This is a common-sense principle that if the accounts do not provide a true and fair view of the company's financial position, directors should not sign them off and the auditors should not give an unqualified report. There are other changes designed to improve the quality of audit service.
	Parts 17 to 22 deal with raising share capital and takeovers. There are a number of deregulatory measures for private companies, including abolishing the prohibition on the giving of financial assistance by private companies and enabling private companies to reduce their share capital using a new solvency statement procedure for capital reductions. This part also clarifies the circumstances in which companies may make an intra-group transfer of an asset at book value. Part 20 extends the existing power relating to transfer of securities under Section 207 of the Companies Act 1989 so that it could be used to require, as well as to permit, the paper-free holding and transfer of company shares. This reflects the work of an industry working group that has been looking at options.
	Part 22 includes provisions implementing the European takeovers directive. These will place the activities of the Takeover Panel within a statutory framework for the first time. The constitutional and operational autonomy of the Takeover Panel will be maintained. However, important new powers are to be extended to the panel, including statutory rule-making powers, the right to have its decisions enforced through the courts and the ability to prescribe sanctions against those who transgress its rules. The Bill's provisions aim to ensure that tactical litigation seeking to delay or frustrate a takeover bid will not become a feature of our takeover markets. The directive needs to be implemented by 20 May. Given the length of the Bill, we have given thought to the need for interim provision, should the Bill not receive Royal Assent before that date.
	Part 28 provides for greater use of electronic communications, which will enhance the immediacy of dialogue between companies and their shareholders and produce significant savings. Subject to shareholder approval, companies will be able to use e-communications as the default position. Individual members will retain the right to request continued communication on paper if they wish.
	Part 31 covers flexibility for the future. Modern legislation in technically complicated fields often leaves the more detailed provisions to subordinate legislation. Much of company law, by contrast, has been written into primary legislation. This is simply a side effect of history, but has meant that updating the law to reflect the changing business environment is not always straightforward. The company law review recognised this problem, and one of its key recommendations was that in future only the principles of company law should be placed in primary legislation and the detail should be written into secondary legislation. We examined this proposal carefully but found that it was not always straightforward in practical terms and concluded, after wide consultation, that the issue would be better addressed by the creation of a reform power for company law that could be used to amend primary legislation by super-affirmative procedures. The proposed reform power is set out in Part 31 of the Bill.
	We recognise that the power is wide and novel, and raises significant issues which will need to be carefully considered by the House. We are grateful for the report of the Delegated Powers Committee, and the views provided by the Select Committee on the Constitution. The important contributions from these committees have raised powerful arguments against the proposal, and the Government are carefully considering the points made. At the same time, there seems to be common recognition that the problem of keeping company law up to date needs to be resolved, and the Government believe that the underlying rationale for the power remains a strong one. This is a crucial and difficult area, and I look forward to debating it.
	Part 33 implements aspects of the Eighth Company Law Directive on the statutory audit of accounts. We are also implementing the recommendation contained in the report Holding to Account by the noble Lord, Lord Sharman, that the Auditor General should be able to carry out statutory audits on non-departmental public bodies.
	Part 34 inserts provisions into the Financial Services and Markets Act 2000 that will allow the Financial Services Authority to make rules for the purposes of the Transparency Obligations Directive. This part takes the first step in implementing the central recommendation of the Morris Review of the Actuarial Profession, that the Financial Reporting Council should oversee the actuarial profession. It is intended that oversight of actuaries will be put on a statutory basis in due course; in the mean time, these clauses aim to facilitate the effective operation of a voluntary regime. The Government also take a power to be able to require institutional investors, through whom the public invest in long-term savings products, to disclose how shares they own, or have an interest in, have been voted. Some institutional investors are already making such disclosures. We want to see such practice extended.
	Part 35 provides that companies in Northern Ireland will be covered directly by the Bill, which legislates for the whole of the UK. At the moment, the law in Northern Ireland is virtually identical to that in Great Britain, but it is made by separate legislation specific to Northern Ireland. This inevitably follows on behind the legislation in Great Britain and means that companies in Northern Ireland face delays before they can get the benefits of the changes being made. Recent public consultation showed that businesses and their representatives in Northern Ireland would welcome simultaneous legislation, and this is what the Bill provides. This does not affect the underlying position that company law remains in formal terms a transferred matter, and a future Northern Ireland Assembly will be able to legislate separately if it so chooses.
	This is a long Bill but it will bring significant improvements in many areas of company law. It has the potential to bring significant savings for business, delivers on the "think small first" principle, and updates the law for the benefit of our largest companies. It also benefits investors. Many people have been involved in the thinking behind this Bill and we are very grateful for all the input we have received. The reason why the Bill has been so widely welcomed is the close involvement over a number of years of so many interested parties. I trust that it will attract a similar degree of support from this House, and commend the Bill to the House.
	Moved, That the Bill be now read a second time.—[Lord Sainsbury of Turville.]

Lord Hodgson of Astley Abbotts: My Lords, I must begin by thanking the Minister for his gallant attempt to précis this gargantuan Bill. I apologise for my merriment, but his belief that the need to simplify company law gave rise to a Bill of 885 clauses seemed a little far-fetched to me in the first instance. No doubt we shall discuss that in Committee.
	It is also only fair that I should congratulate the Government on finally bringing forward the Bill. We have certainly been waiting a long—some would say a very long—time for it. In her forward to the White Paper, Modernising Company Law, published in July 2002, the then Secretary of State, Patricia Hewitt, wrote:
	"Now our challenge is to build on this by promoting enterprise and raising productivity. Market frameworks drive enterprise and productivity, and company law is a key part of that framework.
	That is why my predecessor at the Department of Trade and Industry . . . launched the Company Law Review in 1998".
	By my calculations, that means that it is seven years since the Government set out on this road and seven years seems an unconscionably long time to complete—if we have completed—what the Government described as a key part of the framework. Anyway, we are where we are and we welcome the appearance of the Bill.
	I had the pleasure of working with the Minister during the passage of the Companies (Audit, Investigation and Community Enterprise) Bill when it came through the House in the spring of 2004. A number of us asked the Minister when the main course—we regarded the 2004 Bill as merely an appetiser—would be served. The noble Lord, Lord Wedderburn, from whom we are all looking forward to hearing later, said:
	"It has only recently occurred to me that we have been prompted to introduce . . . the Bill, representing only a small morsel of company law reform, because of the slow pace of company law reform in general. I look forward to the day when the Minister presides over a big companies Bill, one brought forward in 2005, 2006 or 2007—no doubt he will still be in office—but so many matters are now urgent in company law reform that some have now overtaken the Company Law Review".—[Official Report, 17/3/04; col. GC110.]
	Does the Minister recall his reply? Perhaps I can refresh his memory. He said:
	"I am pleased that my noble friend Lord Wedderburn is looking forward to the day when I will bring forward a new companies Act. My personal view is that I hope I will have been sacked or some other act of God will have intervened before such a happy occasion takes place".—[Official Report, 17/03/04; col. GC115.]
	Clearly the Prime Minister thinks that the Minister is doing such an outstanding job that he cannot be moved and this whopping great Bill is to be his reward.
	Your Lordships' House can claim to have a special expertise in company law. The galaxy of talent that will be contributing to our debate today shows that. Perhaps I will be forgiven if I say that I am particularly looking forward to the maiden speech of my noble friend Lady Bottomley of Nettlestone. Before I go any further, I need to declare some interests. I am a director of five companies, one listed on the Stock Exchange, one a mutual company and three private companies. I am also a trustee of two pension funds and chairman of the trustees of one of them. All of those appear on the Register of Members' Interests.
	The press release that accompanied the publication of this Bill at the beginning of November suggested three major strategic objectives for the Bill: promoting enterprise and stimulating investment in the United Kingdom; making the law more accessible and thinking small first; and contributing to a better regulation agenda. Who could object to such worthy aims? My party certainly does not, so we are happy to give an in-principle welcome to the Bill if—and it is a big if—the actual provisions of the Bill fulfil these objectives.
	The Minister has already argued that, given the length of time, all the proposals contained in the Bill have been heavily trailed and consulted on. That may be so, but coming as I do fresh from a marathon session on the Charities Bill—60 hours in Committee and a Bill which it was claimed had been equally widely consulted on—I have to say to the Minister that the appearance of proposals in statutory form has an extraordinarily mind-focusing affect on people for whom up to now it has been something of an academic exercise. So we shall be consulting widely and probing the Government's policy ideas deeply and carefully.
	The main yardsticks by which we on these Benches shall be judging the Bill are three. First, is it deregulatory as the Government claim? When I was a small boy, my grandmother used to say to me, on occasions when she felt that I had been a little careless in the accuracy with which I had reported events to her, "That makes my toe tingle". Faced with a Bill of 508 pages, 885 clauses and 15 schedules, which the Minister claims is deregulatory, I have to say to him, "That makes my toe tingle".
	In this connection, the Minister's colleague in the other place, Mr Gerry Sutcliffe, when introducing the Bill to the All-Party Group on Corporate Governance, described it as deregulatory. I asked him how many clauses of previous Companies Acts would be repealed in consequence. He did not know. He referred the matter to his officials who were present. They did not know either. Not exactly an encouraging start.
	The second yardstick is: does it make company law more comprehensible—or, as the Government like to say, "accessible"? The Minister will recall from our debates on the previous Companies Bill my frequent complaint about the archaeological nature of company law—layer upon layer of changes piled on one another, making the subject incomprehensible to all but the cognoscenti.
	It seems to me that in this connection the Government have failed in at least one major respect: even after we have dealt with this monster, we have still not rid ourselves of the Companies Acts of 1985 and 1989. It is not clear why some parts of the 1985 Act have been moved across and others not. For example, Clause 152 of this Bill repeats word for word Section 303 of the 1985 Act, on the resolutions to remove a director. Others have been moved in part and so now straddle the Bill and the 1985 Act. For example, the reduction of capital—a complex area—is now split between Clause 561 of the Bill and Section 135 of the 1985 Act. Finally, some have not been moved at all. Would the Minister not agree that if the Government wanted to make the law more accessible, consolidation should have been completed and not left half done?
	The third yardstick is: do the proposals strike the right balance? We need a dynamic corporate sector and we need men and women of high quality to serve as executive and non-executive directors. Do these proposals achieve this? It is all too easy to ossify our corporate structures by a series of box-ticking, risk-averse measures. The Minister should not forget the Schumpeter doctrine of the need for "gales of creative destruction" as an essential, if uncomfortable, part of a dynamic economy.
	Before turning to the Bill itself, I should let the Minister know that my noble friend Lady Noakes has agreed to focus her formidable intellect and forensic accounting experience on Parts 15, 16 and 33. She has also kindly agreed to wind up the debate today. My noble friend Lord Freeman has agreed to turn his experienced eye to the important provisions of Part 10, which relate to company directors and their duties. I am grateful to them both. For the rest of the Bill, the Minister will, I am afraid, have to put up with me.
	I turn now to the Bill itself. Obviously I cannot deal with all our points in a huge piece of legislation such as this in a short speech. I have to confine myself to certain major areas. First, I am happy to accept the Minister's invitation to congratulate the draftsmen and the Government on the way the Bill has been put together. It follows a helpfully logical sequence and this will undoubtedly assist our process of scrutiny. But this leads to a general point. A substantial proportion of the Bill is made up of sections transposed from the 1985 Act. The transposition is not, in all cases, on a word-for-word basis. The Minister, I am sure, will argue that such wording changes are merely to reflect modern usage and parlance, but he should be aware that many company lawyers do not see it thus; rather they are concerned that changes in wording may be seen in the courts subsequently as indicating a change in the wishes of Parliament. So we shall be tabling a number of amendments, on a probing basis, to enable the Minister to explain on the Floor of the House when wording changes are just that and when they indicate a shift in policy and thinking.
	Secondly, there is the familiar issue of regulations. As is so often the case today, the Bill we are discussing is, in many cases, a skeleton of principles—the detailed flesh and blood will be contained in regulations. The power to make regulations appears in some 16 different places in the Bill. While principles clearly are to stand alone, the quality of our scrutiny will be much improved if we know something about the detail the Government have in mind. Could the Minister let us know which sets of draft regulations he expects to be able to publish in time for the Committee stage of the relevant sections?
	Turning to specifics, our first major area of concern arises with Part 9, the exercise of members' rights. On these Benches we believe strongly in the concept of a share-owning democracy. Such a democracy will flourish and grow if individuals feel involved in the performance of the companies they invest in. To feel involved people need information. More and more people, quite sensibly, hold their shares in PEPs or ISAs, the holdings of which perforce have to be in the manager's nominee name. It is not clear to us whether the provisions of Part 9 are likely to lead to a proper degree of dissemination of information about the performance of individual companies to their shareholders. Indeed, there is a feel to this and other parts of the Bill that makes one think it has been drafted with big companies and big shareholders in mind. We want to ensure that the interests of the small battalions are not overlooked.
	I am sure we will want to have a serious look at Part 10, which concerns company directors. UK plc needs men and women of the highest quality to lead from the front and it is crucial that we do not scare these people away. For this reason, my noble friend Lord Freeman intends to look carefully at this part and ensure that the right balance has been struck.
	I turn next to Part 11: I noticed in the Financial Times, on Wednesday 9 November, a letter from Alun Michael MP in which he stated that the derivative action, as detailed in Part 11 of the Bill, does little more than elevate to a statutory basis a long-held common law procedure. As the Minister knows, I am no lawyer. However, the legal advice we have received suggests that as the law stands this is available only where the wrong done to the company amounts to fraud and the wrongdoers themselves are in control of the company and thus able to prevent the company from suing. By contrast, this Bill will allow a derivative action by minority shareholders in cases of negligence, default, breach of duty or breach of trust. We wait to see whether the Minister will stand by his colleague in the other place in his claim that this is not a major change in the law.
	We shall also wish to explore the abolition of the requirement that private companies have company secretaries, addressed in Part 12. This is an issue that has been fiercely fought over by parties on both sides of the argument, and I think it is fair to say that the final position published in the Bill is not one that was anticipated during negotiations. It is clear that in some circumstances company secretaries may not provide value, for example for particularly small companies. However, there comes a size at which they do begin to add value and clarity, even for private companies, in defining the functions and duties of a company and thus providing protection to shareholders. We want to ensure that this line is drawn in the correct place.
	I know we want to look at the implications of Part 14, which lays out the basis for political donations by companies. I am all for transparency but we also need fairness, and what is sauce for the corporate goose must also be sauce for the trades union gander.
	As I said earlier, my noble friend Lady Noakes will be dealing with Parts 15 and 16. I am sure she will wish to discuss auditors' liability and a number of other points covered in these chapters. All I wish to do now is to ask the Minister whether, in light of his earlier comments, this means that he will be tabling an amendment to leave out Clauses 393 to 395, which concern the operating and financial review. From his remarks, it was not quite clear to me whether that was being abandoned.
	One of the Government's stated aims, as I pointed out, is to modernise and simplify business in the UK. A proposal in the White Paper in March 2005 was the dematerialisation of share certificates. The Bill reflects this in Part 20, Clauses 585 to 587, which provide a power for the Secretary of State to require all quoted companies to issue electronic share certificates. The Bill requires the Secretary of State to consult before exercising this power. However, there are those who are concerned that this is not the right way to implement modernisation, nor that the requirement to consult goes far enough. There is a fear that any exercise of such a power would be very likely to be unfair to the smaller shareholder—an end result that does not fit well with the Government's objective of "thinking small first". I hope the Minister will be able to allay my fears in this regard.
	The Takeover Panel has been one of the great regulatory successes of the last 30 years and has played an important role in the continuing prominence of London as a world class financial centre. Its ability to operate in a free-flow manner has led to it being respected as quick, flexible and responsive to the needs of the mergers and acquisitions market. We understand the purpose of the EU Takeovers Directive which is contained in the provisions of Part 22, but we will wish to probe for any gold-plating of the directive and whether there is any risk to the methods of operating which have been an integral part of the Takeover Panel's success to date.
	The Minister will also have noticed the concerns expressed by the Delegated Powers and Regulatory Reform Committee at paragraph 15 of its report on the Bill about the interface between the panel's unlimited power to levy penalties, its stand-alone membership and this first appearance in statute law. We shall wish to examine this difficult balance.
	We expect to hold a major debate on the reform power in Part 31. We agree that to meet the demands of UK plc, company law needs to be malleable and adaptable to the changing environment. However, we also need to be sure that the procedure proposed allows for a proper degree of parliamentary scrutiny and public consultation. Again, the Delegated Powers and Regulatory Reform Committee has undertaken an invaluable service in highlighting the complex issues involved.
	To conclude, we on these Benches give an in-principle welcome to the Bill. But it is clear that there is a lot of work for us to do to illuminate, tease out and clarify its detailed provisions. Company law reform may not set many parliamentary pulses racing, but, as the Minister pointed out, it has a huge influence for good or ill on British industry and commerce.
	My final point is not related to a specific part of the Bill. Instead, I look to Europe. It is my understanding that a number of changes to directives may influence how UK authorities may apply company law. I am also aware that the Commission is expected to announce shortly a review of the company law action plan. Will the Minister reassure me that the Bill will not be immediately rendered otiose by future changes in EU law? If we all find ourselves back here next year discussing a new company law reform Bill, then I can only share his 2004 hope that we will all have been sacked or that God will have stepped in during the intervening period.

Lord Sharman: My Lords, I must first declare an interest: I am the chairman of two listed companies, and I sit on the board of two others.
	I, too, welcome the Bill. As the noble Lord, Lord Hodgson, said, it is long overdue. We have asked for it on many previous occasions. I welcome the aims behind the Bill, which the Minister has outlined succinctly, particularly those of simplicity in regulation. I give a particular welcome to the provision that implements my recommendation.
	This is a huge piece of legislation. The changes are very significant—it undertakes a root-and-branch reform of the law. Given the Bill's importance to the business community, the investing community and other stakeholders, I would have liked to have been able to support it without any reservations. But sadly, I cannot. Some concerns have already been raised by the noble Lord, Lord Hodgson, and I will not repeat in detail what he has said. However, I join him in expressing concern—disappointment, really—that the Government have not produced a consolidating Bill. I note what the Minister says about the rationale behind the Bill, but I cannot agree with his reasoning. We still end up with the 1985 Act partly repealed, and company law contained in both the 1985 Act and this Bill—what the noble Lord, Lord Hodgson, referred to as an archaeological approach to company law, although it is to be hoped that we now have a shallower dig. I look at this rather like peeling back the layers of an onion—we do not have so many layers to peel back but we still have it to deal with, and I am not entirely convinced that this is the right way to go about it.
	My second major concern is the wide powers taken in Part 31 to introduce changes in future by use of regulation. I do not object to that in principle; in particular, I believe that the ability to respond quickly is a very valuable tool. But I am concerned that the Bill does not give us much guidance and I would like to hear about the processes of consultation. How wide will it be? Who will determine it? The Bill seems to indicate that that will be entirely in the hands of the Secretary of State. I would also like to hear about whether the outcome of that consultation and the regulations proposed will be subject to the affirmative resolution procedure of both Houses.
	Thirdly, I turn to the troubled issue of the Operating and Financial Review and its relationship with the business review for all companies. I thought I heard the Minister say that he would introduce proposals to eliminate the need for that. Sadly, as most people will acknowledge, the Chancellor's statement abolishing the OFR simply did not earn him the brownie points from the business community that he anticipated. In my judgment, he had not understood that many companies are already a long way down the track in producing these kinds of reports. Investing bodies like the notion of an OFR and the issues that have given rise to concern did not involve whether there should be an OFR, but involved some of the data that were to be required—for example, the degree to which forward-looking data had to be included; whether confidential commercial information by way of key performance indicators needed to be in there; and an earlier concern which had been put right about the degree of care. All of those issues could have been dealt with and resolved.
	I do not believe that we have got to the right solution here. We have about a third of corporate value tied up in intangibles and we now have IFRS numbers being produced. They are highly volatile and not widely understood by the investing community. More than ever now there is a need for good quality corporate reporting. The expectations of investors and the NGOs in the corporate social responsibility community—if I can use that phrase—are high, which inevitably impacts on the reputation of business. We already have the Accounting Standards Board and the Institute of Directors talking about incorporating an OFR requirement within the combined code. I have no doubt whatever that companies will continue to produce OFRs regardless of whether there is a statutory requirement. It would be useful if the Minister could clarify, perhaps with more detail, where we are heading on this matter and whether it is to be left to the FRC or the ASB to produce something outside the legislative framework.
	Finally, on matters affecting the Bill as a whole, I return to the issue of European company law reform and the directives being issued. I understand that matters of company dividend distributions could not be dealt with in the Bill because they will be dealt with in the European fifth directive. Will the Minister confirm that the Government will continue to press for a change in the basis by which company dividends can be made away from a reserves-based distribution to a solvency test? The reason for that is again related to the issue of IFRS standards. As I said before, results are becoming extremely volatile. We have all sorts of funny things going through accounts today which previously did not. The result is that companies are beginning to engage in transactions to create distributable reserves at the right point within the group. It would be much better, and much simpler, if we moved to a straight solvency-based test for determining whether dividends can be paid.
	Those points cover the overall Bill. However, I want to draw the attention of the House to several areas in which we support the intentions behind the Bill but on which we have reservations whether the Bill as drafted will be workable or achieve the desired objectives. The first relates to directors, and the noble Lord, Lord Hodgson, has already referred to Part 10. The notion that corporate endeavour, on which old-style corporate legislation was based, is a partnership between the providers of capital and the management of an enterprise has been overtaken by a more broadly based model, reflected in this Bill, commonly referred to as enhanced shareholder value.
	We welcome that, but the clauses in Chapter 2 of Part 10 in particular are flawed and not workable. Commentators such as the Law Society, while supporting the aims of clarification of directors' duties—which I also support—do not believe that that has been achieved. The new provisions are said by the guidance notes to provide greater clarity on what is expected of directors and make the development of the law in this area more predictable. However, it is argued that the provisions are inflexible and will restrict the courts. The code has not adopted common law terminology and introduces new concepts that will make remedies more difficult to apply. For example, Clause 156(3) requires directors to fulfil their duties,
	"so far as reasonably practicable".
	We are advised that that it is both ambiguous and otiose. We question whether it will require senior directors to set up expensive and extensive internal procedures to create audit trails in respect of any authority which they delegate down the management chain.
	My second concern relates to the provisions creating a new regime under which shareholders may bring actions for negligence, default, breach of duty and breach of trust. While there are safeguards linked to the statement of directors' duties, there are concerns about the potential for abuse and particularly the timing of court involvement. Why is it not possible to have the court involved earlier in the process so that you do not engage in a waste of time which the court then throws out?
	The third area of concern is the exercise of voting rights by institutional investors. Essentially, what is called a long-stop measure has been taken—a power to require voting disclosure. I am unsure why that is necessary. The Company Law Review said that it was desirable, for example, for beneficiaries, members of pension funds and so forth. However, in very many cases the voting policy of intermediaries is actually defined by contract. The pension fund has a contract with the investment manager telling them how they will and will not vote. So I am not sure what one gains by telling them that they have done the job. A good voluntary system is operating and it would be better to wait and see whether it produces the results that we want rather than legislate in advance.
	Finally, on auditor liability, the relevant clauses seem to require monetary capping. Certainly that is the advice that I have received. I understand that the policy—which was agreed by the companies, investing bodies and the auditors themselves—was to be a system based on proportional liability. I am advised that the clauses as drafted will require the inclusion of a monetary cap. If that is the case, then I believe that the result will be an acceleration of cap amount to a very high level which would probably be affordable by only one or two accounting firms and would naturally lead to a very significant reduction in competition. I do not endorse that. I think that the matter can be put right by a relatively simple amendment in Committee.
	There are many other areas of detail to which we will wish to return in Committee. I say again, however, that we welcome the Bill. It is long overdue and the House has our assurance that we will endeavour in Committee and at subsequent stages of the Bill to help ensure that it provides the foundation in law for the future competitiveness and success of British companies.

Lord Clinton-Davis: My Lords, I am pleased to follow the noble Lord, Lord Sharman, with whom I have had the pleasure of conducting a certain amount of business in the past. I am also glad that the noble Lord, Lord Higgins, is here because some 22 years ago we crossed swords in the nicest possible way over the Companies Bill of the then Labour government. I am glad to say that there is not much fundamental difference between us on that score.
	As my noble friend the Minister has said, the Bill is incredibly long. I support what it contains, for the most part. Of course, unlike some of its predecessors, it is highly intelligible. It modernises company law and, like many others, I think that what has been achieved today is much overdue. I am sure that, for these good reasons, it will play a major role in attracting companies to this country. The Minister and all those responsible for advising him are to be congratulated on what has been accomplished, but it is a pity that company law is still to be found in so many different pieces of legislation.
	I am not entirely persuaded by my noble friend that there is not a case for consolidation. I think there is and the Committee will certainly wish to consider that point. After all, this Bill consolidates certain provisions already. It is not beyond the wit of man—and it would be welcomed by many practitioners—that we should seek some further consolidation in the nearer future than is envisaged. So, I await a single company law Bill.
	Although I generally support the aims of this Bill, almost inevitably I have some criticisms because it is so long. The Company Law Review carried out a fundamental review of company law in 1998. It concluded that companies should owe a primary duty to shareholders. But, assuredly—as the review recommended—in relation to that, companies must have regard to the interests of employees, to the communities in which the company operates, to the environment and to the company's stakeholders. In other words, it is necessary to strike a balance between varying interests, which I am not entirely sure that this Bill accomplishes. Personally, I would have preferred an extension of a director's legal duties to employees and, indeed, to other stakeholders.
	Despite the reservations which I have articulated, the approach of this Bill is to be preferred to the present position. In parentheses, do the Government propose another more basic review of company law? If so, do they have any intention of changing the way in which the boardroom goes about examining those matters which come before it?
	Reference has been made to Part 10, Chapter 2, of the Bill. In my view, it would be desirable to detail the duties of directors in a more comprehensive way. Is that not the most appropriate way in which to ensure that directors behave in a way that is wholly consistent with the requirements that are imposed upon them? At the very least, if the Government refuse to go down that path, should there not be a non-statutory guide to directors' duties as has been suggested by the Law Society?
	I am somewhat puzzled about the phrase that directors must act,
	"so far as reasonably practicable",
	in carrying out their legal duties, in so far as employees and shareholders are concerned, as set out in Clause 156(3)(a) to (f). How will that work in practice? Does it mean that the views of employees and other stakeholders must be taken into account as a question of law? What in other words does it mean?
	Why are the Government repealing the legal need for quoted companies to produce an Operating and Financial Review—referred to as OFR? Will not that require some legislative amendments to the Bill, or require them to undertake another enactment? The Minister must surely know that many noble Lords who are likely to participate in this debate, and the TUC, are deeply concerned that the business review is not nearly as potent as the OFR in giving shareholders and stakeholders the insight needed to ensure that the company's operations will truly be in the interests of the company and the nation.
	Why are medium-sized companies exempt from the strict requirements that are imposed on larger companies with regard to non-financial information? Why should not all companies include non-financial information in their business review? Why should not relevant information on social and community issues be included in the business review, as required at present in the OFR?
	Under Part 31 of the Bill, the Government propose that after consultation a company law reform order may prescribe changes in company law. Will my noble friend outline more specifically than he has done the machinery as to how company law reform is to be undertaken? How can we be satisfied that public consultation and parliamentary observations will have been taken properly into account? Of course, there does need to be a fast-track procedure in this behalf but, equally, we must be satisfied that the caveats that I have mentioned are observed. In this connection, how do the Government intend to deal with the criticisms that have been launched on this procedure by the Delegated Powers and Regulatory Reform Committee? There is a real dilemma here. I prefer the way the Government have gone about this, but I think it is incumbent upon my noble friend to deal with that particular criticism.
	Finally, I will deal with political donations and expenditure, in Part 14 of the Bill. In general, I support these provisions, but I am concerned about the exact meaning of what is prescribed. The Law Society has iterated its anxieties in this connection. In particular, would the following represent political donations: corporate entertainment sponsored by companies offered to members of political parties; or politicians being paid for speaking at seminars and conferences?
	Although I am critical of certain aspects of the Bill, it is certainly a great improvement on what we have seen in the past. Despite my criticisms, the Government deserve our support.

Baroness Bottomley of Nettlestone: My Lords, company law concerns the creation and regulation of corporations. Too frequently debate focuses on the second of these objectives. The first is even more important. Few could quarrel with the stated objectives of the Bill. My noble friend Lord Hodgson eloquently made the points about the growing gap between the exciting rhetoric and the possible reality that might be developing. Nevertheless, I am well aware of the obligation to avoid controversy when first addressing your Lordships' House.
	The Government made a wise choice in introducing this lengthy and complex Bill in this House in the light of the detailed knowledge and distinguished experience of so many in this place. The immediate comments of the noble Lord, Lord Clinton-Davis, make the point all too clearly. I feel privileged to join your Lordships and I am deeply appreciative of the welcome I have received. As a Member for 21 years in the other place, I have long had great respect for the proceedings of your Lordships' Chamber in terms of the care and attention to detail and the generally constructive and non-partisan approach to legislation. If ever there was a really difficult and complex Bill to be introduced when in government, I did all I could to ensure that it went to the Lords first.
	The growth of business is the driving force behind economic development and reform over recent centuries. As the Minister himself said, the creation of joint stock companies and the limitation of individual liability, together with the competence of many Scottish engineers, helped the accumulation and the use of capital. All this led to increasing prosperity in Britain and around the world. Only last week a Heritage Foundation report suggested that in economic terms the UK is the fifth most free country in the world, higher than the US.
	A major indicator of economic freedom, as the Minister said, is how easy it is to set up and administer companies. Overall, we have done well, and we do not want to go backwards. Starting and running a business is a component in providing opportunity for those coming to this country, including black and ethnic minorities. They can become successful, contributing economically and socially to society. Analysis of the recent riots in France suggests that excessive obstacles in setting up small businesses there prevent enterprising migrants developing a similar stake in the community.
	I have long been aware of the need to create wealth if we are to fund welfare. Thirty-five years ago, as an idealistic young social scientist working for Frank Field—now a Member in another place—on low-income families, I produced my first report for the Guardian, and published a CPAG pamphlet. It was sent by my father, John Garnett, then leading the Industrial Society, to Sir Keith Joseph, a distinguished former Member of this House. I was summoned to see him, in a state of anxiety similar to that in which I am addressing your Lordships today, and he firmly reminded me that it is so much easier to divide the cake up than to bake it in the first place. There are many socially reforming measures on which I hope to make a contribution in this House. The only way to realise these ambitions is to pay equal attention to the wealth and employment-creating capacity of our nation. So let me speak more about the Bill.
	We have some of the best corporate governance in the world and we must not let a rigid legislative approach compromise the pragmatism and flexibility that has helped us prosper. Ours is a principle rather than a rules-based system. Excessive regulation leads to additional administration. Directors become policemen and box-tickers, rather than strategists contributing to successful wealth-creating companies. As the Minister in his own maiden speech said, the success of business depends on,
	"enterprise, vision and skills . . . Government cannot provide a substitute for that".—[Official Report, 12/1/98; col. 863.]
	Legislation and regulation cannot stop company fraud. We should develop mechanisms to ensure that alarm bells ring earlier. We must train people to recognise the signs. We must empower people to be independent and courageous in their views. We must encourage critical friends. Independent non-executive directors can play a key role. I was pleased that the Minister highlighted the work of Sir Derek Higgs in his recent report.
	Before going any further let me declare my own interests as set out in the Register. I am an executive director of Odgers Ray & Berndtson, heading the board practice and so involved on a day-to-day basis with the identification and selection of directors to serve on all manner of bodies. I also sit on a number of both commercial and charitable boards, nationally and internationally.
	Corporate Britain needs talented directors, both executive and non-executive. But there are already ominous warning signs that the liabilities and constraints involved are preventing some of the most talented from taking up the challenge. The danger of this legislation is that non-executive directors, contrary, I am sure, to the intentions of the Government, will be further deterred or will act defensively rather than independently and, where necessary, courageously.
	Patience Wheatcroft, the Times business and city editor, predicted that,
	"2006 could be the year when quoted companies find that there are simply not enough directors to go round. The rewards do not compensate for the risks involved and people of the right calibre will not volunteer".
	She is not alone. There are indications that sought-after individuals are reluctant to join a board, preferring to serve in an advisory or consultative fashion. FTSE 100 companies will be fine with their strong brands, but it is often the smaller businesses, which may need the NED contribution more, that will be vulnerable. It is welcome that the Government are calling for greater diversity in the board room, but these measures may deter precisely those potential NEDs they most wish to attract.
	Extending the provisions for the indemnification of directors is obviously a welcome step, and those who know, as I know well, Jennie Page, who has been so scarred by recent episodes with Equitable Life, will appreciate that this may take a step forward. She is a public servant of great ability and integrity. Recently she said:
	"It's very difficult to think the circumstances of non-executives are well-defined or well-protected in this day and age . . . If a climate of litigation by boards against their predecessors becomes a generality, you can see how being a non-executive could be a very dangerous thing to be".
	The noble Lords, Lord Sharman and Lord Hodgson, have already spoken about the dangers envisaged in the analysis of directors' duties contained in the Bill. There is a real concern that the statutory code could be unworkable and counterproductive. It may make more work for those from the previous profession of the noble Lord, Lord Clinton-Davis, but directors may feel that they will not be able to move without consulting lawyers as to whether they have complied with the legislation. The strength of the present flexible arrangements is that they are adaptable, flexible and allow for exception—comply or explain.
	The point about the measures being "so far as reasonably practical" has been well covered. The previous wording of "where relevant" seems a much stronger argument. Much may be practical, but not relevant. To have to do something that is practical but not relevant on risk-based proportionality principles would be a significant burden and a diversion of energy. Similarly, the provisions relating to the avoidance of conflict of interest are complex to navigate. It will frequently be far from clear to directors whether a conflict exists.
	In helping directors to resolve all these matters, the first port of call in most circumstances is the company secretary. I am with those who argue most strongly that we should hold on to company secretaries wherever possible. Very often they are the guardians of the corporate governance structure. They are pivotal in influencing and monitoring the governance of a company, advising on new developments and compliance with codes of practice, regulation and corporate law. They ensure the follow-up of board decisions. They are a primary source of information for executive directors and shareholders alike, and I very much hope that the Minister will look again at this matter.
	In recent months, Sir Bryan Nicholson has handled the revised, combined code with great skill and effectiveness. I welcome the Minister's reassurances about the FRC, but I am concerned about the moves in Clause 861 to make the FSA, rather than the FRC, the competent authority to make rules about corporate governance. It may be that that is connected with complying with European legislation, but I hope the Minister will agree that the strength of the UK's corporate governance regime, for which the FRC is responsible, is its flexibility and the degree to which it commands support in the business and investor communities, and that is precisely because it operates on a non-statutory basis. Can he give undertakings that powers will be taken under this clause only if there is full consultation in advance? The rules of the FSA should be used only as a last resort.
	Perhaps I may turn briefly to the subject of charitable enterprises. Like many others in this House, I serve on a number of charitable bodies: the Prince of Wales International Business Leaders Forum, the Ditchley Foundation and, closer to home, the Industry and Parliament Trust. These are charitable companies limited by guarantee. Something like 20,000 charities on the register have the same structure and, although there is some mention of them in the Bill, particularly in regard to the exemption from audit clauses, there are a number of contradictions elsewhere. In particular, the rules on conflicts of interest and duty may possibly have a damaging effect on charities. The impression is given that those rules have been influenced by the assumption that directors are paid, whereas of course with charities that is the exception rather than the norm. After the care and deliberation that this House has given to the Charities Bill, I suggest to the Minister that there needs to be further consideration of the way in which this latest legislation will impact if it is not to create a two-tier system of trustees on charities and possibly open charities to some unfortunate developments.
	After 22 years in another place, although only a few months in your Lordships' House, I am well aware that the best legislative intentions can easily result in unintended and damaging consequences in practice. I recognise the formidable degree of consultation that has been invested in the preparation of this Bill. I have every confidence that the Minister, in his characteristic manner, will give detailed consideration to the serious concerns raised by myself and many others in this debate.

Viscount Bledisloe: My Lords, I am sure that I speak for the whole House in expressing to the noble Baroness our very warm welcome and our congratulations on her most impressive maiden speech, which achieved the very difficult aim of being very interesting while still remaining within the convention of non-controversiality. As everyone here is aware, the noble Baroness has had a very distinguished career in the other place. The records reveal that, on top of that, she also has a wide range of non-political interests. It is a privilege to have the noble Baroness among us, especially when she says that, even when she was in another place, she appreciated the usefulness of this House. We look forward to her active and valuable participation in our future deliberations.
	I shall speak only about one particular part of the Bill. Part 31 is completely different from the rest of the Bill, which deals with, codifies and amends the laws relating to companies and their workings. Part 31, on the other hand, creates an entirely novel system of legislating which, if approved, could be used in many other fields of law. It sets up a system whereby virtually the entirety of company law, with a very few, limited exceptions, can in future be amended in any way, and to any extent, by statutory order rather than primary legislation.
	These statutory orders are subject to a special, super-affirmative procedure, but the hard fact remains that this is a wholesale proposal for major legislation by statutory instrument. This procedure has been considered by the Delegated Powers and Regulatory Reform Committee, the chairman of which I see in his place, which reported as follows:
	"Despite the limitations in clauses 776 to 782 and the super-affirmative procedure, we consider that the proposed delegation of power in Part 31 is inappropriate and we recommend that the House seeks its removal from the bill".
	That is a powerful recommendation from that highly important and respected committee. The chairman of the Select Committee on the Constitution, of which I am a member, has also written a strong letter to the Minister endorsing that recommendation. The part therefore comes with the disapproval of two of your Lordships' committees entrusted with looking at matters of this kind.
	There are two basic objections to this proposal. First, any proposal that Parliament should adopt a new system for enacting legislation should be brought forward in a separate Bill, not tucked away as Clauses 774 to 788 of a Bill of 508 pages, which is apparently destined to be relegated to a Grand Committee. If one had such a separate Bill, it would certainly merit wide consultation and discussion, and would probably be the subject of pre-legislative scrutiny. It could and would be much more fully considered by the relevant committees of your Lordships' House, and would attract and obtain the attention of the many Members of this House who have a keen interest in, and wide knowledge of, the legislative process as opposed to the intricacies of company law. That is demonstrated by the fact that all the speakers so far have only been able to make fleeting reference to this part; not because they consider it unimportant, but because there is so much else to be talked about.
	Secondly, if one has to look at the matter in the context of this Bill, and not in the context of a general enabling measure, the powers given are far too wide and the safeguards virtually non-existent. The Minister recognises that the power is "wide and novel", and wrote a detailed letter seeking to justify it and indicate safeguards. He says that there are many instances where there is a need to update company legislation, or to make amendments to deal with difficulties that have arisen, such as an unforeseen decision of a court. That is accepted, and is a point upon which he has the support of the Law Society. I recognise the force of that argument, and I would see force in this proposal if it could be limited to matters which were both relatively minor and genuinely uncontroversial. Seemingly, however, it cannot be so limited, or so the Minister says. It is wrong to invite Parliament to abolish control of important legislation for mere convenience.
	The Minister further says that developments of company law have, in the past, not involved major political controversy. This is probably strictly true if one interprets political controversy as meaning party political controversy, but an absence of party political controversy does not mean that many past, and potential future, proposed amendments have not been matters of great importance and of widely differing views.
	The noble Lord stated that company law,
	"is essentially a balance between different interests".
	That is just so, and it follows that any proposal to alter that balance is likely to have both strong support and strong opposition. We have just heard one example of that point from the noble Baroness, Lady Bottomley, who drew attention to the conflict between the desire of some people to hold directors to blame when things go wrong, and the need to recruit really good directors, particularly good non-executive directors, who are not put off by the enormous fear of litigation, which, even if they succeed in it, will be enormously costly and time-consuming. I speak as someone who has brought quite a bit of that litigation.
	The powers given by this part of the Bill apply to virtually the entirety of company law and to any amendment, however major, made to that law. The principle that is embodied in this part is equally applicable to many other aspects of the law where one could say that there is a frequent need to update. The Minister recognises this and he states: "We"—by which he means this Government—
	"would not intend to use the power for proposals which are large and politically controversial".
	That should be the case even if one leaves out "politically". He goes on to recognise that,
	"this intention cannot properly be reflected by the words of the legislation itself".
	He therefore proposes to make some undertakings.
	However, I do not believe, and I do not believe that your Lordships believe, that it is right to pass an enactment that makes so radical a change, which the Government themselves recognise gives over-wide powers, on the mere undertaking that this Government—they cannot bind their successors—will not fully exercise those powers.
	If the matter were considered, as I suggest that it should be, in a Bill of its own to set up some fast-track procedure for minor and non-controversial amendments, I am by no means certain that it would be impossible to devise genuine and effective safeguards that prevented the use of such powers in inappropriate circumstances.
	The noble Lord, Lord Carter, who is also a member of the Constitution Committee, has suggested that one of your Lordships' committees could be required to examine each proposal for the use of this power in the light of any objections or criticisms which are made. If that committee decided that the secondary legislation was not apt, the Government would be debarred from going ahead.
	I hope that the Government will accede to the plea of the committee of the noble Lord, Lord Dahrendorf, and agree to remove this part from the Bill. If they are not willing to do that, Part 31 must be recommitted to a Committee of the whole House after it has been in Grand Committee so that this important matter of constitutional principle can be given the full consideration which it requires.

Lord Borrie: My Lords, from the government Benches, I add to the welcome and congratulations offered by the noble Viscount to the noble Baroness, Lady Bottomley of Nettlestone, on her maiden speech, which we so much enjoyed. We enjoyed her speech, and we look forward to enjoying other speeches on other subjects in the future.
	This Labour Government have often been accused of being anti-small business. There is plenty of evidence in numerous provisions of this Bill which proves otherwise. The Company Law Review was initiated by this Government in 1998. Although, as the Minister has said, many organisations and individuals have contributed along the road in consultation to the final outcome, it can be said that the chief driver behind the Bill are the Government and that its final construction is their work.
	However, it has already been expressed by the Government and elsewhere that there will be some disappointment in the country at the failure of the Government, after eight years, to produce a fully consolidated measure that brings together the totality of company law in one piece of legislation. I will be glad if the Minister will comment on this, because sometimes I think that the time is never ripe for halting change and setting out all the existing law conveniently in a readily accessible single statute. Only this week, when we are discussing this partially consolidated Bill, the EU Commission, which initiates a number of changes nowadays in a way that was not the case years ago, has tabled interesting proposals for enhancing the rights of cross-border shareholders. At some time, somewhere along the line, they may need to be put into effect in the UK.
	I started by saying that the Bill is pro-small business. There are many welcome provisions to that effect: for example, allowing private companies to do without the formality of AGMs and making it easier for shareholder decisions to be taken by way of written resolutions instead of meetings. It will also enable private companies to reduce their share capital without the need for court approval. On the latter point, the Government may be wise to respond to the Law Society's point that that power may be undermined by requiring a reduction in capital—which is, after all, a key step in a merger between companies—to be dependent on the formality of requiring documentation. The Law Society also reasonably queries whether the deregulation of private companies is being taken far enough by the Bill and asks whether the Government intend to deregulate the payment of dividends by private companies, as they have, apparently, contemplated doing. Will the Minister comment on the Government's intentions on that?
	I am a former non-executive director of various trading companies, particularly in banking and the media. As such, I was conscious of, and properly instructed by company secretaries about, the manifold legal obligations and duties of a director. In so far as the Bill clarifies the duties of a director, I naturally welcome the greater clarity that is the aim of Part 10 of the Bill. I do not know if the Law Society's pessimism about whether Part 10 is likely to achieve the aim of clarity and accessibility is justified. Certainly, I would welcome a statement from the Minister on his view of how far the common law on a director's duty of care will continue to operate. I do not think I can be the only person who does not find Clause 154(4) easy to interpret.
	As I said, I have been a non-executive director, and I have never been happy with the traditional strict view that non-executive directors basically have the same responsibilities as the managing director, the finance director and the other executive directors. I strongly believe in the value to a company of the outside knowledge and experience that non-executives can bring to the boardroom—the maiden speech of the noble Baroness, Lady Bottomley, took this view, and she has great experience of recruiting non-executive directors—and in their negative value of not being closely tied in to the ethos of the full-time directors and managers.
	As a result of Part 10 of the Bill, is the Minister concerned with the possibility that the noble Baroness, Lady Bottomley, mentioned, that fewer people will be willing to become non-executive directors in future? Of course I mean useful, valuable non-executive directors. There is the other point of view, that some people take on too many non-executive directors. It sometimes beggars belief that one person can perform diligently and conscientiously all the manifold duties of being a director of numerous companies. That is the other extreme. Yet it would be a pity if new conflict of interest rules or other obligations make the taking of more than one or two directorships at a time near impossible.
	I look forward with interest to the Grand Committee discussion on takeovers and mergers. So far as they may have adverse effects on competition, the Enterprise Act 2002 and the substantial lessening of competition test applied by the Office of Fair Trading or the Competition Commission are in place, and are accepted as efficacious. This Bill is concerned with the other aspect of takeovers—the effects on the rights of shareholders. It seeks, as the Minister indicated, to implement the EU directive on takeover bids and to put on a statutory basis the rules which protect minority shareholders and other rules which have been governed in the UK since 1968 by the self-regulatory code on takeovers and mergers. I am with the noble Lord, Lord Hodgson, when he says that there is probably considerable regret at the passing of a successful and much-praised self-regulatory system. Yet the Government deserve praise for seeking to preserve as much of the old system as possible, and in particular—an important point—to deter parties from tactical and abusive use of litigation to hold up, postpone and delay takeover situations, the effect of which may be desirable. I understand that Article 4(6) of the directive is key to a continuation of the UK principle established by our courts in the 1987 Datafin case, where courts may refuse to hear legal proceedings relating to a bid and obviously designed to hold up and delay what is happening.
	This is not the first time the Government has helpfully sought to preserve the essentials of an effective UK self-regulatory system when having to put it within a statutory framework to comply with EU obligations. Misleading advertising is a field I know well, and the subtlety but effectiveness of the UK approach to implementation of an EU directive has proved fair, practical and effective. In our debates in Grand Committee on Part 22, I look forward to hearing the Government expound their proposals to continue the autonomy and effective and fair working of the City takeover panel.

Lord Freeman: My Lords, it is a pleasure to welcome my noble friend Lady Bottomley of Nettlestone to these Benches. I share the widely held view among her ministerial and Cabinet colleagues, of which I was one, that whenever the noble Baroness spoke, as a Member of Parliament or Minister, people listened. It was not just the clarity with which she spoke—as again exemplified today—but also the clarity of her thought. It is a pleasure to welcome the noble Baroness; she will make many contributions of great value to your Lordships' proceedings.
	I declare several interests as registered, as a director of a number of companies both public and private, listed and unlisted, and commercial and charitable. I agree with what the noble Lord, Lord Borrie, says about Part 10. Before following his train of thought, I strongly agree with the noble Viscount, Lord Bledisloe, on Part 31. He is absolutely right; this section has to be deleted from the Bill. It is unparliamentary. It is a parliamentary outrage—and I am not normally used to intemperate language in your Lordships' House. The noble Lord, Lord Dahrendorf, is in his place and I am sure that your Lordships will want to study the Delegated Powers Committee report. I sense that the argument is that we do not want to waste time coming back with another Bill, so why not have a super-statutory instrument mechanism to amend company law when it becomes necessary. That is unparliamentary. It is one thing to have a statutory instrument to change a particular part of a Bill, it is another to introduce major new sections of a Bill. I hope the Government will think again on this. It is a rare to get a recommendation from the committee of the noble Lord, Lord Dahrendorf, which says, "Strike it out" and gives such clear and bold recommendations. I hope your Lordships will agree with the committee's recommendations.
	I want briefly to raise some points that have not already been raised on Part 10, because I agree with what has been said by the noble Lord, Lord Sharman. I am delighted that both parties on this side of the House seem to be of one mind on the subject. I hope the Minister—the great Stakhanovite of the Government Benches when it comes to Committee—will listen to reasoned arguments. We should not be fighting each other from trenches; I hope that reason will prevail. Consultation outside this House is one thing, parliamentary process is another. Detailed consideration should be given in this House. Although the Minister is not guilty of this, sometimes one has the impression that Bills are presented on the basis of "take it or leave it" because they have been widely consulted upon. That is not a parliamentary process, and I know the Minister will listen carefully to arguments.
	We ought to reflect in Committee whether the codification route—that is, putting on a statutory basis many requirements on directors that are contained in common law, in case law—is the right way to proceed. I am not wholly convinced because there are a number of problems we need to think through. First, there is the lack of flexibility, which is obvious. Judges can interpret case law bearing in mind the facts of a particular case. Once it is in statute, that flexibility is much reduced. The Bill itself is already a tiny bit confused because it cross-refers to case law without defining what that case law is. Of course, we are going to get new case law overlaid on statute. As the noble Lord, Lord Clinton-Davis, said in his contribution, fresh legislation will follow. It is a minefield.
	There has been some thought in the department, I understand, about issuing a guide, not only because this Bill is not comprehensive and does not deal with insolvency legislation, but also, as my noble friend Lord Hodgson reminded us in his excellent speech, several parts of company law have been left out and are extant. We must think about issuance of a guide most carefully, because a guide issued by the department, even were it consulted on with the professional bodies, could be more of a complication than simply reliance on the Bill.
	My concerns about Chapter 2, particularly Clauses 156, 157 and 159, have been well spelt-out. I briefly point my finger at three or four key issues which the Committee has to consider carefully. The change of the wording from "responsibilities of directors to the company" to "members as a whole" will bear careful consideration as to the implications. The new duties in Clause 156(3) beyond the duty to the company, which means the shareholders, is a bold—I think somewhat dangerous—departure. We have to look at the implications of that, and whether they in anyway cloud the paramount duty of a director to look after the interests of the shareholders. I agree with the Minister that directors fall down in their duty if they just look at short-term considerations and issues. The Minister must be right there, but to codify, in the way this Bill does, is dangerous.
	There are other issues. What does the phrase "independent judgment" mean for a director, for instance? How do you avoid a future conflict of interest that cannot be identified at present? Something may arise in future that a director cannot contemplate or specify and therefore avoid.
	We need to consider the Bill carefully in Committee. My noble friends Lady Bottomley and Lord Hodgson were absolutely right that the Bill must pass two clear tests, but I am not convinced that Part 10 passes them. First, will it prevent the registration of more companies? Will it to any significant degree encourage companies to register elsewhere in the European Union or the world? Will it discourage non-executive or executive directors from coming forward for both large and small companies? One thinks of the public interest companies, the charitable companies, the small private companies. The evidence so far is that there is concern. We may be able to allay that concern, but it must be dealt with.
	In conclusion, I am always baffled by regulatory impact assessments and how they are calculated. There is reference to maximum possible benefits of £105 million per annum from the provisions of Part 10. I have tried to understand where that calculation comes from. I think that it was the estimate of a few years ago that 150,000 private companies would each save £700 per annum in not having to take legal advice on the implications of company law—perhaps I simplify. I simply do not believe it. I think that we are talking about £105 million of costs, not benefits. There must be some way of obtaining a more detailed explanation of how that is calculated and, perhaps, of auditing the figure in future.
	In the interests of time, I conclude by welcoming the Bill in principle and looking forward very much indeed to a reasoned Committee debate.

Baroness Tonge: My Lords, perhaps I may be the first from these Benches to welcome the noble Baroness, Lady Bottomley of Nettlestone, to the House and congratulate her on her maiden speech. It is good to see her here.
	I rise with a certain amount of trepidation. I was brought up in a professional family and was taught early on that most business is dodgy and big business is probably evil. Needless to say, I have no interests to declare—I must say that before I go on. When I became international development spokesman for my party in another place, the feelings that I had been brought up with were quickly reinforced by bombardment from non-governmental organisations telling me of the misdeeds of multinational companies, some of them British, in developing countries.
	However, I soon began to realise that big business in Britain in the 19th century led to our social advance and better education and healthcare. It was big business that did that for our country. Likewise, in developing countries, it should be big business—multinational companies, our own big companies, whatever we like to call them—that is the engine for development. It is that issue that I wish to address.
	Large companies are already realising that they must behave in a sustainable way and that it is ultimately in their interest to protect the environment and improve the lives of the workforce. In recent years, an enormous amount of leaflets and brochures have come from big companies telling us of their social responsibility and how they have left the environment exactly as it was before they started their excavations, or whatever. So things are happening, but far too slowly.
	The Prime Minister, at the World Summit on Sustainable Development way back in 2002, said that we must actively promote corporate responsibility and accountability through, among other means, appropriate national regulations. As my noble friend Lord Sharman and others have mentioned, why, then, have the Government taken a backward step by abolishing the requirement for companies to produce an Operating and Financial Review? That would have gone a long way to ensure transparency and accountability among UK companies. As my noble friend said, they are already preparing those reviews.
	Instead, the Bill places too much reliance on the concept of "enlightened shareholder value", which is a trifle vague, to put it mildly. Presumably, it puts the onus on shareholders to turn up to every meeting and grill directors on the sustainability of their operations and whether they are protecting workers and the environment. Unless we all become ethical consumers and every shareholder behaves like my noble friend Lord Avebury, who is renowned for owning one share and turning up to shareholder meetings to make a stink on one issue or another—and we will not, of course—change will be very slow.
	The Organisation for Economic Co-operation and Development has laid down very good ethical guidelines on how companies should behave. The World Bank has also declared that voluntary standards do not work. The regulator for our companies should be our Government and the rules of practice should be written in the Bill.
	I confess that I know little about business except that it must be competitive and must not have too much red tape, but I am reliably informed that there are countries with high levels of business regulation, such as Denmark, Sweden and Finland, which are doing very nicely thank you and are very competitive indeed.
	I will mention a brief case study. Some time ago, I watched a brilliant documentary film called "Mangetout". It was about the activities of a supermarket chain in this country. Before the Minister pales, I will add that it was Tesco. It was growing mangetout for consumption in this country. We saw the wonderful conditions in which the workers work and the wonderful uniforms that they had. We saw wonderful footage of mainly women walking up and down the rows of mangetout plants singing, and I translate:
	"Up the hillside, down the valley
	Tesco is our greatest friend".
	That was repeated over and over as they went happily to their work to bring us the mangetout that we so crave.
	I have very sad news: there has been a recent report that that idyll no longer exists. In South Africa, where that company has pushed down prices paid to the farmers and demanded tougher conditions, the rights of thousands of fruit pickers have been eroded. Women workers report dangerous exposure to pesticides, no protective clothing and poverty wages for long, long hours of work. Yet, in April 2005, Tesco announced record annual profits of £2 billion. That company is a good one. It has created voluntary codes of conduct for its fruit suppliers, focusing on technical issues such as pesticide spraying. It supports the Ethical Trading Initiative on Minimum Labour Standards. It is committed to social responsibility. Despite all that, we have this terrible report of the abuse of workers in South Africa.
	The voluntary approach does not work. It needs underpinning by minimum legal standards applied at national and international level. The Bill must be used to do that for our companies. We must not miss the opportunity.
	Amendments would be welcome in the following areas. I leave it to my very experienced colleagues to work out the detail, but there must be a positive duty on directors of companies to minimise any negative impact due to their operations in other countries. It must be extended to national and foreign associate companies and subsidiaries. The reporting requirements on social and environmental impact must be strengthened in the business review. It cannot be just financial matters that are reported on. When all else fails, there must be protection under UK law for affected communities abroad so that they can seek compensation for any human rights or environmental abuses committed by our companies.
	Our large companies—all multinational companies—have huge power and resources and can be the engine for development all over the world. Let us ensure in the Bill that the operations of our companies are sustainable and responsible.

Lord Judd: My Lords, I declare an interest as a non-executive director and a charity trustee of the kind so thoughtfully referred to by the noble Baroness, Lady Bottomley, in her remarkably telling maiden speech. As the noble Baroness emphasised, governance and regulation should indeed be about effectiveness, and the UK obviously needs a thriving, effective private sector as the basis for our future economic, cultural and social well-being. But governance should also be about responsibility. In this context, the intention and drive behind the Bill are to be welcomed.
	Two-thirds of world trade is undertaken by multinational corporations. They have a very significant influence on the social, human and environmental experiences and rights of many millions of people both in the developed and developing countries. The Bill will inevitably be judged by many by the degree to which it successfully addresses the power and responsibility of UK companies operating in the global economy, the impact on employees, communities and the environment, not only here in the United Kingdom but, at least as importantly, overseas as well.
	The Bill underlines the primary duty of directors to deliver financial benefits to shareholders. In Clause 156 it also spells out clearly that, in discharging their duties, directors should have regard to the interests of their employees and the impact of the company's activities on the community and environment. However, it does not seem to spell out equally clearly what directors must do when their social duties conflict with the primary duty to promote the company for the benefit of its members.
	The Government have an enviable reputation in their tangible commitment to the poor of the world. The work of DfID is exemplary and the Chancellor has been a powerful pace-setter with his personal conviction. The Government have also declared their intention to give priority to the challenges of the environment. It would, therefore, be good if my noble friend, when responding to the debate, could clarify precisely what is the policy of the Government towards any potential conflict of interest on the part of directors in these spheres.
	My noble friend has stressed that the Government have settled for what is called "enlightened shareholder value". This assumes that good social and environmental practices are always compatible with—and, indeed, good for—profitability. This is a good philosophy. I subscribe to it. Unfortunately, it is not yet widely enough reflected or understood in the real world, where short-term opportunism is too often the order of the day. As Friends of the Earth, ActionAid, Oxfam, Christian Aid, Amnesty International and others, with all their front-line expertise, have argued, there are altogether too many indications that the voluntary approach is not working. As the noble Baroness, Lady Tonge, reminded us, this has been acknowledged both by the World Bank and OECD.
	There are three specific issues on which the reassurance of my noble friend would be encouraging. First, is it not possible to insist in the Bill that, rather than just having regard to the impact on workers, communities and the environment, directors should have a positive duty to take reasonable steps to minimise negative impacts? Should this duty not also extend to the operation of foreign associates, subsidiaries and sub-contractors of UK companies?
	Secondly, just why was the Operating and Financial Review abolished? It was on course to ensure improvements in the quality and transparency of company reporting to stakeholders. Can the reporting requirements of OFR really not be incorporated into the provisions of its successor, the Business Review? This would mean that all UK companies would be required to disclose information on their environmental and social impacts alongside their annual financial reports.
	Thirdly, as the noble Baroness, Lady Tonge, has argued, in their imaginative approach to global justice, do the Government not believe that it is essential that there should be some protection under UK law for affected communities abroad so that they are able to seek compensation for human rights and environmental abuses resulting from the activities of UK companies, their overseas subsidiaries, associates and sub-contractors? Is this not fundamental to a commitment to justice? If this Bill is not the appropriate vehicle for such protection, what other arrangements do the Government favour? This really is no longer a matter that can be left in the air.
	Let me take just one illustration. Since the 1980s, in the Niger Delta in Nigeria, to say the least, it is clear that there is room for considerable concern about the gap between the published corporate responsibility policies and ethos of major companies and their continuing direct and indirect performance on the ground. Some of the disturbing issues from this part of Africa are still caught up in legal proceedings, but at this stage it can be said that despite the finding of the Federal High Court of Nigeria last November that gas flaring violates guaranteed constitutional rights to life and dignity and that it must stop, the gas flaring, with all its waste, environmental damage, deafening noise, severely adverse health consequences and pollution for the communities in the vicinity of where it happens, continues. Elsewhere in Nigeria, failure to replace ageing pipeline infrastructure has led to repeated oil spills and associated environmental destruction, including the pollution of water supplies and the loss of mangroves, fish ponds and aquatic life.
	In contrast to the declared and increasingly vaunted policies on social and environmental matters of the companies concerned, both British and foreign, the realities are those that I have just described when it comes to what is happening on the ground. A sad situation becomes still more ominous with the reports of harassment of communities which may be in the path of business projects in places such as Oganiland.
	Enhancing the duty of directors as set down in the Bill to include a duty of care towards communities and environments is an urgent necessity. I cannot believe that my noble friend would not agree. I hope that he will make this clear when he winds up today. I cannot believe that those in companies such as Shell, who have produced their impressive policy texts on corporate social responsibility in these matters, would not welcome such a provision in helping to turn rhetoric and intellectual conviction into front-line action.
	We need a healthy, vigorous private sector. We also seek a sustainable, stable, secure and safer world. Environmental threats are the biggest single danger facing humanity. They are also central to more immediate issues of political stability. Extremism and terrorism, which so preoccupy us, breed on alienation, deprivation, suffering, exclusion and injustice. It is no exaggeration to say that in this Bill we have an ideal opportunity to make a positive, imaginative and muscular contribution to the sustainable, safer world we all seek. It would be sad were we in an otherwise highly commendable Bill to miss that opportunity.

Lord Patten: My Lords, while I was very sorry to miss the opening passages of the Minister's speech—for which I apologise—I know that we will have many more opportunities in the coming weeks and months to hear his tones as the Bill unfolds.
	My noble friend Lord Freeman rightly referred to the Minister as using Stakhanovite endeavours to get so much legislation through the House. I believe that a subsequent scholarship by historians of the Soviet era proves that Stakhanov never existed except as a figment of the propagandists' ideas of productivity. So, in future, I shall delete the word "Stakhanovite" and think "Sainsburyite." In what I have to say I must declare all my interests as a non-executive director, as set out in our Register of Interests. I think it is proper on this occasion, as I intend to speak solely about directors' duties, that I also declare the interests of my wife, who as non-executive chairman of Brixton plc and a non-executive director of Great Universal Stores plc, Bradford and Bingley plc and, from 1 February, Marks and Spencer plc, is, as your Lordships will realise, a far more distinguished company director than I could ever assume to be. I assure your Lordships that in the Patten household we operate a "Chinese duvet" policy on corporate matters.
	I have three reflections and one main point to make. The first is to say that the Bill rekindles the question I have often asked in this place: just what is the DTI for? In this period of the "Bonfire of the Ideologies," as we are told by leaders and would-be leaders of the three main parties, perhaps one of the first pieces of tri-partisan agreement can be dispensing with the services of the DTI. I realise that declarations in Explanatory Notes, or for that matter in the preamble to a Bill such as this, have no statutory weight, but when made they set the tone. There is no specific mention or reference in either to the importance of the corporate sector or of corporate enterprise. The noble Lord, Lord Judd, referred to the importance of corporate enterprise in his remarks on ethical and environmental matters, with which I largely agreed, although I do not think he has fully recognised all the efforts made on these fronts by UK corporates in recent years. In particular, I wonder whether the Minister's colleagues in the Treasury have fully grasped the extra regulatory burdens placed on the corporate sector by this Bill, and that the health of this sector, with its critical revenue raising capabilities, may be inhibited.
	My second reflection is that we do need, of course, to ensure the responsible business behaviour of companies in this country. I hope that will always characterise the activities of modern British business. I do not believe that trying to do this purely by regulation and legislation is the best route. The UK corporate sector has, with very few exceptions, in recent decades compared wonderfully to those of the United States, France, Germany and, in particular, Italy, given their multiple scandals. I think it has performed in an exemplary way and the environmental record of UK corporates has, I believe, been exceptionally good compared to worldwide standards. That is something my party rightly takes very seriously.
	My third reflection, as I intend to concentrate solely on the provisions of this Bill relating to directors' duties, is that running a company is difficult. I think there should be recognition of that fact. It is challenging; it calls for judgment of what is best and the balancing of competing—sometimes unendurably competing—pressures in order to find the right way forward. In many ways exactly the same challenges that face Ministers, face directors in the boardroom. So I do not think that the introduction of a new statutory code for directors in this respect is wise. I admire, as the noble Lord, Lord Sharman, I think said in his earlier speech, the consistently well argued opposition of the Law Society to some of the provisions in Part 10 of the Bill. The statutory code approach is, I think, inflexible, confusing, likely to lead to increased bureaucracy, to load more cost on to companies and will soon date. It is not too late for the Government to think again, even at this late stage, and to substitute a voluntary code structure for the statutory code proposed.
	That is enough reflection. I would now like to turn to my main point. This concerns the innocent-sounding duty of company directors—executive and non-executive alike, these being the same in law—to "promote the success of the company for the benefit of its members." I as yet have no idea what the word "success" means in this context. I hope the Minister can help us on this point in his winding-up, as he might also by defining the word "members." This is no Committee stage point; it goes right to the very heart of the Bill. Indeed, the Minister raised it in his opening speech. An extremely suspicious interpretation of these provisions—and far be it from me ever to fall into being in any way a suspicious or extreme person—would be that these duties are some brand spanking new insertion, little by little, under the radar screen, of the widest possible interpretation of stakeholder duties or stakeholder interests, so-called, into boardroom decisions. The very word "stakeholders" can very soon mutate into "the whole population of the country."
	At present, the concept of the company as an entity in whose interests directors must act is well understood. The purposes of the new statutory code are, as I have said, unclear, and will, I think, add regulatory burdens and costs rather than savings. In the face of the uncertainties the Bill introduces, I think directors will have to look very hard at the threat that the courts may intervene. There are objective tests on the face of the Bill which would, I think, at best encourage and, at worst, sometimes require the courts to intervene in matters previously and properly left to the directors and board. Their business judgment—and that is what the men and women who staff our boardrooms are called on to deploy, day in and day out—may well be inhibited. Suppose a company for sound business reasons decides to reduce its workforce. That could put it at odds with its "members'" interests, when we find out what "members" actually means. What about the position of joint-venture companies? I think this requires a lot of forensic examination.
	Perhaps more pointedly, where does the Bill leave directors? Some of my noble friends and some noble Lords on the other side of the House may have been in the position of facing a hostile takeover bid or of putting themselves on to the market and the company being in receipt of competing bids. Under present practice it is possible to decide not to accept the highest bid if this is judged not to be in the interests of the company as a separate entity. The likely circumstances are too well-known to bear elaboration, but to take just one example, a bidder might make a highly leveraged bid, which could lead, in the sitting directors' views, to levels of debt that could not reasonably be serviced by the present cash flow or future earnings, thereby threatening to diminish pension benefits or to make the sale of assets necessary.
	All this uncertainty will certainly lead to two things; out of uncertainty will come certainty. First, it will lead to increased corporate costs, as levels of directors' and officers' insurance are bound to shoot up as directors look, quite properly, to dealing with the sort of threats—referred to by my noble friend Lady Bottomley—non-executive directors are so unfairly attacked by. Secondly, and I must choose my words carefully, because there are one or two people present who have worked with professional services firms in the past, I think there will be a whole new and highly profitable advisory industry as professional services firms and consultancies gear up to advise boards on their new frightening responsibilities, with all the slowing down of decision-taking and unnecessary box-ticking that will entail. There will be a lot of new business in the offing for professional service companies and consultancies.
	I should like to end on this note: exactly what is the nuisance that the statutory code is trying to deal with? Perhaps the Minister, in his normal Stakhanovite—or now "Sainsburyite"—way can give us an example of the type of nuisance that will be dealt with by this statutory code. How, in a period when we are entering a new phase of slow growth in the United Kingdom, no better than the European average and with a growing deficit, are the sort of increasing burdens and costs that are being placed on business going to help the corporate sector to do the sort of things that the noble Lord, Lord Judd, in his speech was seeking for them to do?

Baroness Murphy: My Lords, I should say at the outset that I do not include myself in that galaxy of talents in company law reform to which the noble Lord, Lord Hodgson, referred earlier. Indeed, as a psychiatrist, I do not know if I can offer my services to the Minister only to shrink the Bill in some way. I want to speak as a member of the UK Shareholders' Association; I should say at the outset that I am a close relative of one of the directors of that association and have read their views on this Bill with interest.
	I want to speak to a point already raised by the noble Lord, Lord Hodgson, about Part 9 from the point of view of those 10 million or so people in the UK who have put their precious savings into PEPs and ISAs, boldly joining the new shareholding democracy, without realising—and I include myself in this—that they enjoy none of the rights of ordinary registered shareholders. The use of nominee accounts for these types of investments has effectively disenfranchised investors. I contrast this with the old style of small personal investments 25 years ago, when a nest egg bought a handful of shares in a blue-chip company or one's favourite retailer, and then you had the fun every morning of watching your stocks go up and down. If you wished, you could go to the AGM and, with a bit of luck, you got a free lunch. Now, though, no less than 40 per cent of all shareholdings in this country are held in nominee accounts. That is a staggeringly high percentage of holdings, and people have no say in what happens to those investments.
	In the Bill the Government acknowledge the desirability of nominee account shareholders being properly informed about their investments and support them being able to participate in company meetings, request and vote on resolutions, and so on. But, in practice, the Bill is unlikely to make any substantial difference to the majority of those account holders.
	First, the Bill is enabling, not obligatory. It relies on the support of companies to change their articles to support enfranchisement of nominee shareholders, but it is clear that companies probably will not want either the hassle of change or the cost of implementing these rights, even though, as the Minister said, costs may go down substantially if £250 million a year is saved through other parts of the Bill. Although the Bill provides reserve powers in Clause 137 to enable the Secretary of State to compel companies to provide information, there are no powers to compel companies to involve shareholders in company business. It is not clear under what circumstances these reserve powers would be used, nor how the intermediate tier of stockbrokers and financial advisers will be persuaded to collaborate with such a system. If the intermediate purchasers and operators do not want to provide the information, then, with the best will in the world, a voluntary system will not work.
	Companies will differ in their decisions about nominee shareholder enfranchisement; information to the shareholders will often be varied and confusing. Can the Minister outline how there could be more clarity and a bolder structure in the shareholders' interests, to which I believe the Government have committed themselves?
	Of course, many shareholders will have no desire to immerse themselves in the detail and should not be burdened with information if they do not want to be. But if they do, their rights should be there on request. The USA is able to provide such a system of shareholder enfranchisement in these cases, through use of a third single party account, and I see no reason why we cannot do this. Perhaps the Minister can explain why.
	Part 8 sets out the public nature of a company's register and a company's right to apply to a court to refuse access to the register if it believes that access is not for a proper purpose. What exactly might "not proper" include? There is a concern that it might include denying access to the register of a person critical of the board's decision-making who wants to advertise his criticisms to others on the register. Or is that not the case?
	Most of the Bill promotes the Government's commitment to clarity and openness in business, and it is to be welcomed. However, I would like the Government to be a little less supine about the rights of the small but numerous investors whose savings are so crucial to the overall pattern of investment in this country.

Viscount Trenchard: My Lords, I am grateful to the Minister for introducing the debate. The Bill represents the culmination of seven years' work, and we welcome its introduction to your Lordships' House.
	I join other noble Lords in congratulating my noble friend Lady Bottomley of Nettlestone on her most interesting and constructive maiden speech. We are fortunate indeed to have her among us in your Lordships' House and I look forward to her future contributions, from which we will all greatly benefit.
	I would have preferred the Bill to have been called the companies Bill, and have eventually become the companies Act 2006, in that it amends and restates much of the Companies Act 1985. After all, do not most Bills reform something? I tend to agree with my noble friend Lord Hodgson and the noble Lord, Lord Sharman, that it might have been better to have had one new consolidated companies Act.
	There is much in the Bill that is welcomed by business practitioners. The provisions to make it easier to set up and run a company will be appreciated by proprietors of SMEs which account for the vast majority of British businesses. However, I was particularly struck by one point made in the excellent speech of my noble friend Lady Bottomley. She regretted the abolition of the requirement to maintain a company secretary. I wholly agree with her and cannot believe that this will help any company, small or large. After all, somebody will still have to do the company secretary's job, and it is better to be clear who that person is.
	I will not repeat all the excellent points that other noble Lords have made, but I would like to mention a small number of areas where I believe the Bill can be improved. I strongly agree with the United Kingdom Shareholders' Association that incurring substantial start-up costs in preparation to trade under a particular name should not be a sufficient ground to lay aside the objection of an existing user of an identical or substantially similar name. After all, in the age of the Internet, it is much easier to check in advance whether a particular business name is in use.
	I also agree with UKSA that the grounds on which a court may properly refuse a request from a non-shareholder for a copy of the shareholders' register should be included in Clause 116. In the case of a publicly traded company, it is not difficult in any event to become a shareholder, and it is not easy for a company to prevent improper use of its own shareholders' register by a person who has purchased a few shares purely to obtain the register. Would it not be simpler and easier to make a distinction here between public and private companies? Private companies should arguably not be compelled to disclose their shareholders' register to non-members, whereas there is surely an argument that the shareholders' register of a public company should be in the public domain in any event.
	As the noble Baroness, Lady Murphy, correctly stated, there is a widespread feeling that the Bill's provisions on beneficial shareholder enfranchisement do not go far enough. I agree that indirect shareholders who wish to participate actively in the governance of all the companies in which they invest should be given the legal right to do so. It may be true that the vast majority of holders of unit trusts and investors in collective investment schemes will not want to be bothered with the huge amount of bureaucracy inevitably involved. Most of them will be content to cede their voting rights as shareholders to the fund manager concerned. Perhaps purchasers of unit trusts and the like could be asked whether they wish to opt in or opt out of their right to be involved in corporate democracy at the point of sale.
	If fund managers are to be compelled to procure the distribution in hard copy of annual and interim reports to all indirect shareholders, irrespective of whether they wish to receive them, I guarantee that more than 90 per cent of such voluminous material will end up in the dustbin unread. That is likely even in the case of companies which have opted to provide summary financial statements under Clause 402. Nevertheless, the rights of those beneficial shareholders who wish to participate must be respected.
	I am attracted by the Canadian system, whereby custodians invite beneficial shareholders to opt into the governance and information systems. Beneficial shareholders who have opted out will be asked every year whether they still wish to opt out and, whether they have or have not, they are in any case required to be notified of matters concerning extraordinary general meetings. I think it is clearly wrong to leave the question of whether and to what extent indirect shareholders are enfranchised to the discretion of individual companies. The Government's proposals to do with that issue are woefully inadequate, in spite of the sensible position that had been adopted in the White Paper.
	I should declare my interests, as disclosed in the Register of Interests, as a director of a number of companies and as chairman of the board of trustees of a charity. I am also concerned that the extension of the duties of directors will not do anything to encourage more well qualified individuals to take on non-executive directorships. The provisions of Clause 156 are likely to lead to an increase in lawsuits against directors by those who think, for example, that a particular company's operations do not at all times and in all respects have a wholly beneficial impact on the community and the environment. I think it is wholly superfluous to write into law a requirement that a director must have regard to the need to foster the company's business relationships with suppliers, customers and others.
	That type of thing is common sense, as is the desirability of a company to maintain a reputation for high standards of business conduct. My noble friend Lord Patten made some very sensible comments on this clause. Surely the Association of Chartered Certified Accountants is correct in its opinion that it would be unrealistic to expect directors in any set of given circumstances to adopt positive stances in respect of all prescribed factors at the same time and that the ultimate arbiter of whether directors have made wise decisions should be the company members themselves. The section on derivative claims and actions by members is not clear enough and the inclusion of this concept in the Bill is likely to encourage US-style class actions in the UK.
	Clause 862 gives the Financial Services Authority power to make rules concerning community obligations on corporate governance for issuers on a regulated market. Is the CBI not right in its submission that it is not appropriate to widen the FSA's powers in this direction? This is another reason why it is unwise to muddy the waters concerning directors' clear responsibilities to shareholders with too much codification of responsibilities to the community and to other stakeholders.
	Some of the language in the Bill strikes me as odd. "Oversea companies", covered in Part 25, is a case in point. It sounds strange. Why can we not have "overseas companies", especially as Clause 126 in Part 8 allows us "overseas branch registers"?
	Lastly, I agree with the noble Viscount, Lord Bledisloe, and my noble friend Lord Freeman, who so eloquently explained that Part 31, which gives the Secretary of State the powers to change anything in the Bill through secondary legislation, should be removed. Companies need certainty and stability. If the Act can be altered at will—substantially altered—there seems to be little point in your Lordships' working to improve the Bill to give British and foreign companies the stable legal framework that they need to continue to run profitable businesses and to provide productive employment. For this and for all the other powerful reasons put forward by the noble Viscount and by my noble friend, I earnestly hope that the Government will think again on this point. In principle, there is much that is good in this Bill, but I hope that when it leaves your Lordships' House, it will be a Bill of which we can all be proud. It has been a privilege to speak in this debate and I look forward to the speeches of other noble Lords.

Lord Wedderburn of Charlton: My Lords, I join in the welcome and the congratulations to the noble Baroness, Lady Bottomley, on her maiden speech. If my congratulation is brief I am sure that she will understand that it is no less sincerely said.
	I am also able to exercise the principle that I always like to welcome any measure that my noble friend on the Front Bench brings before the House. In his first dance through this vast legislative operation he did much to rebut the maxim with which my illustrious predecessor and the great company law scholar, Professor Jim Gower, used to open the academic year. He always said, "Unhappily, I have to tell you company law is not a very sexy subject". It becomes more sexy if one follows the Herculean efforts undertaken by the Company Law Review Group, which was to look at it not only as a dry commercial subject, but as one that governs relationships of many stakeholders and as part of social law. That is why it proposed the OFR—the Operating and Financial Review—to which noble Lords have so rightly referred. I leave aside what I was going to say about it, except to comment that its sudden death through a veto from other parts of the Government astonished me. I want to hear more from my noble friend about it. In the words of the Company Law Review, it caused large companies to report on their stewardship of a wide range of social relationships. Whatever noble Lords think, that stewardship is already recognised in company law and in the Bill.
	I leave aside consolidation in the hope that someone—I hope a young man—in the vast labyrinth of Whitehall is already writing the first clause of a consolidation measure for 2012, in which he will put together a single thread—that is important—of company law, takeover law and financial services.
	Of course, as its great novelty, the Bill takes up the maxim of the Company Law Review, "Think small first". The trouble is—if I can put in a phrase and leave out a page—that the Bill does not "think small first" in its deregulation of formalities, AGMs and so on, but it "thinks private company first" and the two are not the same, as every practitioner in company law will understand. "Think private company" is a very different proposition from "think small".
	It is also important to notice what the Bill would do with the basis of our company law. Every company law system imposes a price for two necessary privileges, which are incorporation by registration of the company as a separate legal person and, secondly, as we have had since 1855, the privilege of limited liability for the members. The Bill actually adds a new area of immunity for the Takeover Panel as regards its address of the rule of law, but that is a footnote. The price that we have always insisted on at the core of our system is, first, adequate, appropriate disclosure of a company's affairs and, secondly, protection of investors and the public against fraud. In company law, "fraud" does not mean merely crude misrepresentation or deceit; it means a sustenance of those fiduciary duties and principles of which the great American Chief Justice Cardozo once said that the important thing was that they were "somewhat higher than those of the marketplace".
	The claims that the fiduciary duties have recently been tightened in the courts are, in my submission, erroneous. They were a kind of allergy brought on by severe attacks of what has been called City-equitable-itis. There is no tightening of the fiduciary duties and it is important that the passage of the Bill is not an occasion on which they are developed. I say that about only Part 10, which has been much discussed.
	The clauses in Part 10 of the Bill are a brave effort clearly to set out the basic fiduciary duties in statute. The fact that people do not realise that they were already there in cases, in slightly different language on occasion, does not alter my view. Nor do I think that the clauses on the derivative action are other than a brave and clear effort to set out something that is in our law already. I may be too influenced by having spent many years with the rule in Foss v Harbottle, but my studies in this area lead me to believe that these two parts of the Bill are an excellent effort, albeit they will be examined closely in Committee. Unhappily, Committee will be in that quiet legislative graveyard of the Grand Committee from which one can play truant only if the pressures of important matters in the Chamber force one to leave it. It is a pity that the Committee is not taking place in the Chamber.
	The most important clauses—as has been pointed out—are those that centre on the basic duty of directors to act in the interests of the company. To summarise my view, there are not the difficulties that people have been putting forward on Clauses 154 and 156 and that part of the Bill. There is a requirement that directors act in what the Company Law Review called,
	"an enlightened attitude to shareholders' interests".
	Curiously, that is similar to what the CBI said in 1973 when it reported that a company, particularly a public company should act as,
	"a good corporate citizen in business".
	However, the clauses on corporate governance are important for another reason and I make two final points on that. First, simply analytically, executive directors have come to occupy a new social stratum—a new position—not just in Britain but around the world. Recent research has disclosed very clearly that that has little or nothing to do with the so-called global competition for good executives. Of course, the development is at its most objectionable when it takes the form of very high rewards for business failure. Marconi was only one example—there are many others—about which noble Lords can read in the Library where I have deposited a publication dealing with these matters.
	Quite apart from failure, the House must understand that, in the past two decades, the takings—or what American colleagues call rent extraction—from corporations by executive directors have risen exponentially. They have risen, are rising and should be restrained. The Government must also understand that the three orthodox remedies for that—greater disclosure, supervision by institutional directors or supervision and monitoring by an expanded pool of post-Higgs non-executives—have all shown signs of failure. At the very least, my noble friend will surely amend the Bill to make the shareholders' resolution on directors' remuneration, in which we include salaries, share options, incentive plans and what one professor in the 1980s called an exceptionally diverse and expensive perquisite of large scope and ingenuity. Surely the shareholders' view on that coming from the remuneration committee should be made final.
	There is a further reason to believe that the Bill should at least include some procedural measures to deal with this social question. Brendan Barber of the TUC recently said that directors,
	"have continued to build up enormous VIP pensions, while they tighten everyone's belts except their own . . . [They] already get huge salaries and they should be in the same pension scheme as their staff".
	He said:
	"It's time to end pension double standards".
	Well, I do not know about that, but certainly riches overflow in corporate pension pots while ordinary folk fear, after a lifetime of toil, for their old age in their company pension schemes. I have various examples of that, but time does not allow me to describe them although it would astonish some of your Lordships who I find are not quite "with it" in knowing how far this has gone.
	Similarly, I must leave aside Part 31, although I accept that we should take a close look at it because it seems, as has been said by your Lordships' committees, to go beyond the normal rules of legislation. Subject to all that, I welcome the Bill, which has a vast number of sensible and practical proposals.

Baroness Goudie: My Lords, I welcome the Bill. I welcome its three objectives set out in the Explanatory Notes: first; to provide a simple, efficient and cost-effective framework for British business in the 21st century; secondly, to adopt principles that are simple and as accessible as both possible for companies and their advisers; and thirdly, to avoid imposing unnecessary burdens.
	However, I do not believe that the Bill as currently drafted fully achieves those admirable objectives. In particular, it does not entirely avoid imposing unnecessary burdens on companies and their advisers. I have in mind the position of auditors. In that connection, I declare an interest: I provide consultancy services to Deloitte.
	This is necessarily a large Bill. This is a Second Reading debate. At this stage, I shall touch on only a few points. The first relates to something that is not in the Bill. There are no provisions deregulating dividends paid by private companies. There should be a simple provision allowing directors of private companies to declare dividends having taken due account of their duties as directors and the ability of the company to meet its debts over the coming year. These general fiduciary duties form a code of conduct and are set out in Chapter 2 of Part 10 of the Bill. They are sufficient. They derive from common law and equitable principles. They are owned by all directors. They involve the exercise of independent judgment and of reasonable care, skill and diligence.
	The issue is whether more than these general duties is required in relation to the payment of dividends. In the case of public companies, particular dividend rules are required by the European Union Second Company Law directive. However, a quarter of a century ago, the United Kingdom chose to go further than that requirement and apply the rules to private companies as well. Whether or not that was right at the time, it is not right in the present circumstances. There have been major changes in accounting recently—in particular, the move to international financial reporting standards last year. The United Kingdom generally accepted accounting practice, which private companies normally follow, is increasingly based on those standards. The ability of private companies to pay dividends is being increasingly restricted by the changed accounting rules.
	The additional requirements of the directive rules now create a threat to the ability of United Kingdom companies to keep delivering a flow of dividends on which pension schemes and pensioners depend. That is because even large companies are dependent on their private subsidiaries for dividend purposes. The general duties of directors, as set out in the Bill, and a test to meet debts as they fall due over the next 12 months would be adequate. The directive rules should no longer be extended to private companies.
	I now turn to another topic—Part 11 of the Bill relates to the derivative claims and the actions by a member, the key aspects of which are set out in Clause 239(4). That provides that a derivative claim may be brought by a member in respect of alleged wrongs committed, if at all, prior to his becoming a member. Subsection (3) also extends the concept of derivative claims to persons other than directors. These provisions would attract vulture funds and exploitation by them and their lawyers. It is a recipe for litigation—with companies having to obtain more protective legal advice—and a risk-averse culture, to the detriment of sound management activity and profit. There are also a number of important drafting points appropriate to be raised in Committee, in order to clarify the scope of derivative claims and actions, and to strengthen protection from frivolous and vexatious claims.
	I turn to Part 16, relating to audit, and focus on three aspects: criminal offences in Clauses 494 to 496; auditor resignation in Clauses 503 to 510, and auditors' liability in Clauses 516 to 523. The inclusion of the proposed new criminal offence for auditors—in particular Clause 494(2)(a), which links such an offence to omission of statements relating to proper accounting records—would result in unintended consequences. That will have a detrimental impact on all companies. In order to cover themselves, auditors will spend more time checking accounting records and will be less willing to exercise judgment than at present. They will feel under great pressure to qualify accounts on grounds relating to accounting records, particularly as there is no material threshold there. As a result, business will have to spend more time on keeping records and less on serving their customers and developing innovative products and services.
	In many ways, the impact on the United Kingdom economy might be similar to that of the Sarbanes-Oxley legislation in the United States, which, as we know, has had a detrimental impact on the whole of that economy. The impact of the auditor offences part of the Bill will be most significant for small, entrepreneurial companies which are the growth engine of the economy. There is already a requirement on directors to keep proper accounting records. Given the less formal systems in operation in smaller companies, auditors at present make a judgment about the quality of the accounting records at a point in time. The threat of criminal record will mean that they are much less willing to make similar sorts of judgments in future. As a result, there is a greater chance that auditors will offer qualified opinions in respect of accounting records. The qualification could, in turn, be taken as prima facie evidence that directors had failed to maintain proper accounting records, and lead to their potential prosecution.
	The overall impact of the offence's wording adds unnecessary audit costs to business, creates uncertainty for directors of smaller and medium-sized companies, and diverts efforts away from innovation and customer service in such businesses toward an unnecessary level of systems of accounting and control. It serves the economy poorly and sends out the wrong message to entrepreneurs about the consequences of incorporation under United Kingdom jurisdiction. It may also further reduce choice in the audit market. The threat of criminalising auditors over accounting record qualifications would also cause even more firms to deregister as auditors.
	I fully support the concept of criminalising fraudulent or dishonest behaviour in auditors, but existing legislation in the new Fraud Bill already covers that. In addition, significant deterrents already exist by way of the recently re-established Financial Reporting Council—and their more pro-active Financial Reporting Review Panel, new Accountancy Investigation and Discipline Board and new Professional Oversight Board for Accountancy—to prevent negligence.
	Clauses 495 and 496 enable guidance for prosecuting authorities, but do nothing to control privately brought prosecutions. The audit profession is rightly concerned to avoid mischievous or malicious use of the criminal justice system, particularly to leverage civil action against an auditor. I dispute the need for criminal penalty clauses in the Bill. They are unnecessary, as the offences are effectively legislated for elsewhere, and conflict with the thrust of using regulatory penalties and civil action rather than criminal proceedings to deal with matters. If they are needed, they should be redrafted to avoid unintended consequences. As an absolute minimum, a clear statement is required about the intent behind using the words "knowingly or recklessly" in the audit context. In particular, assurance is required that honest mistakes do not result in a criminal record.
	Again, there are a number of important drafting points to be raised in Committee. The same applies in relation to auditor resignation where the clauses do not seem to follow the lessons that should be learnt from the Jarvis plc and Easier plc cases. The draft clauses would also seem to create some unnecessary bureaucracy in terms of subsidiaries of public companies.
	Finally, I turn to auditor's liability: the provisions protecting auditors from liability and liability limitation agreements; their authorisation, effect, duration and termination; and the disclosure of them. Under the Bill, liability limitation agreements, or LLAs, have to be agreed by the company. The auditor has no power to require LLAs. Assuming, however, that there is an LLA in the first place, it is unilaterally terminable by members of the company by ordinary resolution. Moreover, it can be revoked by a court. The effect of the process of obtaining an LLA, the ability of the company to terminate one or of a court to revoke it means that auditors may have no protection whatever regarding their aggregate potential liability to the company. The result: uncertainly for auditors and for companies.
	Further, the wording of the proposed legislation seems to allow only LLAs that set a monetary cap on the auditor's liability. Those caps are unlikely to be acceptable to investors, who may only consider proportionality—that is, limiting an auditor's liability to such proportion of a loss as is attributable to culpability, and ignoring the effect of insolvency on other defendants. Therefore, LLAs are unlikely to be achieved in respect of major companies. In the absence of LLAs, auditors will assess their liability exposure and that will lead to increased work and fees; increased numbers of audit qualifications in circumstances where there is no LLA, as a protective measure to avoid risk of claims; and, in some instances, resignation from companies where LLAs are not agreed.
	I realise that time is running out for me, but this is a good Bill; it can and should be made a better one.

Lord Gordon of Strathblane: My Lords, company law is central to our prosperity. It is important, therefore, that it is up to date and able to meet the needs of a modern, dynamic economy. As the noble Lord, Lord Wedderburn, has pointed out, our company law is based on principles largely established in the 19th century; namely, that the right to limited liability brought with it certain responsibilities, and that the advantages should be matched by arrangements for accountability. A thorough overhaul was long overdue to make the law clearer and more accessible. I join with other noble Lords in broadly giving a warm welcome to the Bill.
	I recognise that the choice of the word minimalist to describe a Bill with 885 clauses may seem somewhat bizarre, but the Government have, by and large, followed the principle of preferring codes to over-prescriptive legislation. There are a couple of exceptions, which I hope will be addressed in Committee—for example, directors' responsibilities, which might be handled in another way. By and large, they have not over-legislated here. It is a big Bill because, frankly, company law is a very big subject.
	As a small side issue, I suggest that the DTI allocates a small promotional budget to export our legislative system on company law abroad and counter the regulatory imperialism of the SEC, which is exporting American methods into Asia, in particular. We start with the huge advantage that Commonwealth countries by and large have company law based on ours. Without being chauvinistic about it, I believe that our system is better than that of the United States, where over-legislation has produced corporate scandals which, by and large, we have avoided.
	We are more than pulling our weight in Europe in these matters. I attended the European Corporate Governance Conference in London in November, where Commissioner McCreevy said that it was quite clear that Europe has got the message that we need to have a proper balance in the tension between accountability and entrepreneurship. He made the point that:
	"Despite having an Internal Market of over 450 million, we still make it difficult for companies to exploit this. We need more entrepreneurs and we need to make it easier to set up, and to wind up, businesses. Let's face the facts. How easy is it to do business in the EU? Comparatively, not very".
	He instances only two countries in the top 10—one of which, I am glad to say, is the UK.
	I congratulate the Government as this Bill is a model of how legislation should be introduced. I recognise the, perhaps, legitimate complaint from the Opposition that it took rather too long to produce the Bill; but I should much rather spend more time in preparation than have bad legislation rushed through and then repent it for five years before having another legislative window. The consultation has been extensive; consultation becomes real only when people see draft clauses and realise the effect of them and how they will impact on their businesses. At that point, you get a genuine response, rather than over-general submissions to the government department.
	The one exception that I must make is with the OFR clauses. At best, I may say that the Government have handled that matter in a messy way. We in the All-Party Parliamentary Corporate Governance Group commissioned some research into the OFR, and the broad conclusion is that while all the companies thought that the Government had done extremely well in consulting on how the OFR should be implemented, they had not done very well in deciding whether the OFR was necessary. My present feeling is that the Government have got it about right with the business review proposal, but I must admit that they have gone a very long, round-about way in getting there. At the start, the proposals frightened a lot of people because they meant that expressions of opinions about futures would have to be audited. Frankly, auditors are not equipped to second guess the future; they are equipped to measure the past. The Government got away from that and I, along with the noble Lord, Lord Freeman, and others, in this House in March, broadly welcomed the OFR as meeting the needs of business as it then was. We then got a shock when the Chancellor said that they were not going to proceed with it; then we heard that it was not really killed off because the business review was coming in its place. I believe that we have ended up in the right place, but we could have got there a bit more efficiently.
	Thirty years ago we had regional stock markets in this country—we had one in the city of Glasgow. Individuals now own a quarter of the percentage of shares that they owned then. Insurance companies, by contrast, own twice as high a percentage, pension funds three times as much, and foreign investors nearly five times as much. So the relationship between shareholders and companies is radically different from what it was even 15 or 20 years ago. The difficulty is how we mediate trust between essentially remote investors and companies. Even active investors are not as close to companies as owners used to be.
	I am not for a moment suggesting that the relationship between owners and companies was always healthy; sometimes they were too close to the company and interfered far too much. But it is undoubtedly very difficult to get a relationship with investors. It is a simple question of time; it is all right for the BPs of this world, but for the vast number of companies it is more difficult. I was chairman of a company with just under £400 million market cap; expecting shareholders to spend time seeing me even on a once-a-year basis is frankly over-optimistic in such a circumstance. You cannot get an effective dialogue going.
	I shall concentrate on the issue of shareholders and directors, leaving others who are more expert to concentrate on the important provisions on audit. "Shareholders" is a term that covers a multitude of sins, as it includes owners, directors, officers and staff, all of whom may be thought to have an interest greater than simply financial in the company. It also involves real investors, such as institutions, which think, at least at the beginning, that they will be in for the long term. But it includes, too, straightforward gamblers, who are gambling on an increase in the share price. There is nothing wrong with that; it is a perfectly proper use of the stock market. People frequently gamble on a company being taken over, which is hardly always in the best interests of the company, but it is a straight punt—instead of backing horses, you back shares. Almost instinctively, you ask yourself whether those people have exactly the same rights as someone who has held shares for 30 years. Regrettably, the answer must be yes, as I see no other way of dealing with it—and the rewards of holding shares for a long time should come through mitigating capital gains tax on them, as in fairness the Chancellor has by and large done, so that there are distinct benefits to encourage long-term shareholding, which is preferable to short-term shareholding.
	There is also a difficulty with shareholders who are remote that they always want verification of things, because they are dealing with people whom they do not really know. That creates a kind of "audit society", when people look for every statement to be vouched for by an independent observer. Life does not work that way.
	I accept that rules are necessary—and, to some extent, cars with good brakes can drive faster, so rules are helpful. They help entrepreneurism. But there comes a point when the scaffolding of regulation can obscure the structure of the building. I hope that we do not ever reach that stage in corporate governance, or it will become a joke. The problem is that if you over-rely on rules, you get a false sense of security. I remind the House that Enron was given an A-rating by CalPERS—and if that rating was translated into an investment decision, a lot of public service employees in California must be slightly worried about their pensions.
	As for directors, I rather like the concept of enlightened shareholder value, although whether you should put it in a statutory code or deal with it in another way I am not quite sure. I shall consider that in Committee. But I rather like the idea, as it is common sense that directors' enlightened self-interest should lead them to do all the things that various noble Lords would like to see done. The only difficulty is trying to do that by legislating for it; the idea that by legislating for something you achieve it is a delusion that politicians constantly suffer from; it does not work that way. Frequently what happens is that if you over-legislate, people simply avoid the legislation. That is why the legal profession is quite as well remunerated as it is at the moment.
	As good example of this, I bumped into a contemporary of mine at Glasgow University, Sir Menzies Campbell—and in the light of current circumstances I should say that he is much younger than I am—who reminded me that there is an international athletics regulation that at the Olympics or the Commonwealth Games, there should be a 14-foot fence between the male and the female quarters. When there were games in Brazil, that regulation was observed by putting a single strand of wire 14 feet off the ground—and a lot of legislation is very much like that.
	In conclusion, I urge noble Lords to look at ways in which to promote the restoration of trust, because unless you have trust between shareholder and director, no codes are going to work. The crooks will still get away with it, and the good guys will avoid going into business. You have to restore trust—and I believe that the Bill could go a long way to doing that. I believe that it is capable of amendment, I hope beneficial, in Committee.

Lord Haskel: My Lords, I come from the generation of business people who admire Peter Drucker as a business guru. He was one of the very first to say that free enterprise cannot be justified because it is good for business. It can be justified only because it is good for society. I think many of us who have spoken this evening would agree with that. This Bill helps to achieve that, and generally has my support.
	Another thing I would like to say about the Bill is that it has not been prompted by scandal. My noble friend Lord Gordon referred to this. Corporate scandal in America prompted the Sarbanes-Oxley Act in 2002 as an immediate response. Most now agree that it was clumsy and unnecessarily onerous and placed American companies at a disadvantage, so, like my noble friend, I think the Government were right to take their time over this Bill.
	Some noble Lords have wondered if the Bill is deregulatory. Of course it is. Two-thirds of the old Companies Act has gone in order to delete the outdated Victorian ideas that we should have got rid of years ago. Certainly there are additions, but they too are long overdue. The most important of these is a clear statement of the duties of directors. Because of the absence of this statement of duties, lawyers usually told directors that their sole duty was to look after the interests of the shareholders. In my view, that has been the major cause of short-termism and malicious harassment of directors.
	Unlike the noble Lord, Lord Patten, and the noble Viscount, Lord Trenchard, I welcome the Bill identifying the various interests and stakeholders to which directors should have regard in fulfilling their duties. I agree with my noble friend Lord Clinton-Davis that perhaps this could be established rather more firmly. At the same time there are measures to strengthen the directors' accountability to shareholders, and the ability of shareholders to hold directors to account. An important change incorporated in Part 11 of the Bill is that if the shareholders sue directors, any damages accrue to the company and not the claimant shareholders. Some—including the noble Viscount, Lord Trenchard, and my noble friend Lady Goudie—argued that this may lead to American-type class actions. I do not think so. It is contrary to the business culture we have here.
	I agree with the Minister that removing a lot of the old Victorian rules effectively deregulates and simplifies the formation and running of small private companies. Providing a model set of rules, simplifying reporting, and abolishing the need for meetings, for company secretaries and for maintaining certain registers all eases the administrative burden, and it is to be welcomed. Many of these things have become meaningless. They are simply routine, and serve no purpose at all in most small companies. However, removing these regulations does not mean that directors of private companies can become sloppy. They still have a duty of care to the shareholders and stakeholders that has to be taken seriously, and that is only right. In my 30 years' experience in business, many companies got into difficulties because the directors failed in these duties. I hope the Minister will reassure me that the removal of the administrative and regulatory burdens for small companies in no way diminishes the duties of care that directors have to ensure the success of the business, because that is especially important in private companies.
	The Minister told us that one of the objectives of this legislation is to "enhance shareholder engagement". No one could argue with this objective; indeed, the combined code encourages active shareholding. However, as the Minister told us, the nature of shareholding has changed in recent years. Some of us own shares in our own name, but, as the noble Lord, Lord Hodgson, and the noble Baroness, Lady Murphy, pointed out, many of us own shares through collective savings like PEPs, ISAs, pension funds or unique trusts. These are all held in a pooled nominee account, so there is just one name on the share register. The Share Centre, which is a share-dealing organisation in the City, agrees with the noble Baroness that over 40 per cent of personal shareholdings have no shareholder rights because their shares are held in nominee accounts. The Share Centre is concerned about this, and I think it has a point. The Bill identifies the problem in Clauses 136-37. These clauses allow companies and shareholders to amend the company's articles to enable the shareholders to enjoy their rights voluntarily, or, as in Clause 137, the Secretary of State can compel companies to do so.
	The noble Lord, Lord Sharman, spoke about a voluntary system, but even so the Bill could go further. The reason for nominee accounts is the expense of companies keeping detailed shareholder records. That may have been true 20 years ago, but today information processing and storing electronic data have become so cheap that anything you ever communicate again in your life can be stored for ever. The Bill recognises this by allowing electronic share records and transfers. If companies are going to take advantage of this, they should also commit to providing governance rights for their individual shareholders grouped in nominee accounts. Instead of the Secretary of State having to make regulations to compel companies to do this, it should happen automatically when companies take advantage of the electronic communication rules under Schedules 6 and 7. This would enfranchise all nominee shareholders, and would be in keeping with the Government's objective of enhancing shareholder engagement. Perhaps the Minister would be kind enough to say something about this.
	Like other noble Lords, I have noticed in recent years that there has been a rise in different kinds of shareholders. There is a shareholder who views a share as a financial instrument, quite separate from the company. He does not actually need to own shares: they could be hedged, borrowed or derived, and traded as an asset, entirely separate from the company or its governance. He may not hold any financial asset, instead using derivatives to mimic these assets. I am told these derivatives are a good thing, and are used mostly for hedging and for spreading risk. But forecasters say that the derivatives market will grow this year to more than 10 times the world's domestic product, and I am forced to wonder why you need to hedge more than once. The Bill is strangely quiet about this kind of shareholding. Does this mean the Government are not concerned, or do they hope that the European transparency directive relating to the disclosure of shareholding will clarify this? Or do they think the FSA is the competent authority to deal with it? Perhaps the Minister can tell us.
	I have the feeling that the enormous growth of that kind of activity has taken all of us, and the Government, by surprise. There are probably more surprises in store, because new instruments are being invented all the time. To deal with this rapid change in types of shareholding and financial instruments, company law has to be frequently updated, so we need the facility to respond quickly. That is why I welcome the power to reform company law by secondary legislation in Part 31 of the Bill. Clauses 776 to 782 impose a lot of restrictions on government action, but even so, in the report published last month, your Lordships' Delegated Powers and Regulatory Reform Committee concluded that Part 31 should be removed from the Bill. I would regret that. In spite of the concerns of the noble Viscount, Lord Bledisloe, and the noble Lord, Lord Freeman, I think a way has to be found to maintain this right. The Financial Reporting Council has been given the task of keeping these matters under review, but surely the Government must be in a position to react should the council convince Ministers that it is necessary to update the law. Perhaps the Minister could tell us what the Government will do about this.
	This is a huge and complicated Bill. Like other noble Lords, I do not think there are a lot of votes in it, so there must have been a temptation to put it to one side. But it is important for the economy. It helps to maintain Britain's being a fair, reasonable, well regulated and secure place to do business. That is why I welcome the Bill.

Lord Lea of Crondall: My Lords, first, I echo the remarks made by many noble Lords in acknowledging the impressive maiden speech of the noble Baroness, Lady Bottomley of Nettlestone, who is in her place. I have been acquainted with her in the Farnham area on the Surrey/Hampshire border for more than 20 years and I very much appreciated, for example, her support in the 1980s in my role as chairman of Farnham Roads Action regarding the construction of the A331 Blackwater Valley route. That was at the time that a certain Peter Bottomley was Minister for Roads. I think that I can now say that after 20 years. The road had huge benefits for Farnham and all the surrounding areas. I am sure that the noble Baroness will agree that the road has considerably enhanced the local environment.
	I was also interested to hear about the upbringing of the noble Baroness, Lady Tonge. She reflected certain prejudices along the lines that companies are not made in heaven. Having spent 35 years as a trade union official, I have similar feelings. But where do we go from here? We have to balance a number of considerations. That is why I welcome the fact that directors' duties are codified for the first time in the Bill. They have to act in the interests of shareholders, but pay regard to the longer term and the interests of employees, suppliers, consumers and the environment. I hope that my noble friend the Minister will not downplay the significance of that. I will return to that point at the end of my remarks.
	How does that codification square with the dictum that "companies exist for their members"? We are all aware of the rules of the Stock Exchange, but, as has just been said, in the era of hedge funds, regarding so-called members of the company who can often be speculative owners, in and out in a few weeks, when their shark-like activity has from their point of view driven the share price first down and then up again, do these members have long-term interest in the company? Clearly not. We must get behind the rhetoric.
	The noble Lord, Lord Hodgson, in an interesting formulation said that people must feel involved in the companies that they invest in. Although he did not use this maxim, but what about, "people must feel involved in the companies they work in"? At that level of philosophy, I am sure the noble Lord would agree that those phrases cannot be put in any order of merit. The formulation that people must feel involved in the companies that they invest in lacks the ring of credibility in the real world for two reasons. First, ownership—for example, through pension funds—is hardly likely to mean that one identifies particularly with the company; we do not know which companies we are investing in, do we? I shall refer to that again in relation to Clause 866, because I strongly support transparency of voting by institutional and other investors. Secondly, I must try to rephrase the noble Lord's maxim, because it suggests that it is impossible within the philosophy of Anglo-Saxon company law to do anything about this. I notice that the noble Lord, Lord Haskel, believes that the codification of the duties of directors is meaningful. I hope that it is meaningful and I hope that the Minister will say that it is meaningful and that it means something substantive; I know that he will wish to respond to that.
	My noble friend Lord Wedderburn of Charlton referred to the CBI in the 1970s. I echo his comments in terms of the CBI's evidence to the Bullock committee, of which we were both members. He made an excellent point, which I wish to reiterate. The Bill is very similar to what the CBI said it wanted in 1975 in its evidence to that committee. I do not know what that proves, but it is an interesting reflection. Maybe it has taken the CBI over 30 years to catch up with that limited thought. I echo my noble friend's point about the tendency of the system—I will not use the "c" word—to produce more inequality. There seems to be an income distribution that is out of control within remuneration committees. Those countries which have a two-tier board system, or at least the remuneration committees in the successful Scandinavian model, and those countries with a GDP per head that is higher than ours and which compete in the global market, have a different philosophy about executive remuneration that is not against the interests of successful companies. They really could be said to believe in the idea of one happy family. But the idea that we have one happy family in our income distribution takes the biscuit in lacking credibility. All levels of employees should be represented on remuneration committees.
	The noble Lord, Lord Hodgson, who is welcome to intervene if I am wrong, asked whether some of the philosophical questions in the Bill and the whole question of directors' duties were a change of words or a change of policy. I am on the side of this being a change of policy, not just a change of words. If that dichotomy is to mean anything, we would not be making such a meal of a change in directors' duties if it was words without policy. That cannot possibly be the case, but I am sure that the noble Baroness, Lady Noakes, will put her own gloss on that. It will be interesting to see which way she jumps. Is it a change of words or is it a change of policy? I look forward to hearing what is in her mind.

Lord Hodgson of Astley Abbotts: My Lords, I was talking about where some clauses are transposed word for word—not about Part 10—and where some clauses transposed with some odd words changed. We want to know whether those odd words in clauses throughout the Bill, not just in Part 10, signify a real change in thought and intent by the Government, or whether they are just trying to make a change to reflect modern practice. The purpose is to make sure that subsequent case law can be judged in the courts on the proper basis of what the Government intended.

Lord Lea of Crondall: My Lords, I thank the noble Lord for that clarification. It does not remove my point that it could apply to the central debate that has been continuing for much of the evening about the codification of directors' duties. Is this just playing with words or is it a change of policy? As the noble Lord, Lord Haskel, said, there is something quite meaningful about the codification and my noble friend the Minister will comment on that.
	I wish also to make a point about the dog that has not barked in this debate when it comes to modern companies. This must be the only economic debate that I can remember in the past couple of years when we have not talked about India and China. Yet it is remarkable, is it not, that here we have employees who are spread around the world? They have international trade unions. We have all sorts of ramifications of the global economy and I am a little surprised that I have not heard much about that, whether it is a European company or any other global phenomenon.
	In conclusion, will my noble friend confirm that the phrase "so far as reasonably practicable" does not mean that directors only have to have regard to these other interests when they do not find it particularly inconvenient to do so? I ask my noble friend to give a definitive assurance that the proviso about "reasonably practicable" will not drive a coach and horses through the clause as a whole.
	Finally, I echo those who have said that the operational and financial review in its new guise is important to produce a narrative which will give some substance to the philosophy of the Bill. As I have mentioned, I also believe it is very important that Clause 866 concerning transparency of voting will go a little way towards shareholders' understanding of companies, as the noble Lords, Lord Hodgson and Lord Freeman, have advocated.

Lord Tunnicliffe: My Lords, I start by declaring an interest as a non-executive director of three SMEs. I generally support the Bill and I want to make two brief points. As a member of the Merits Committee of this House, it is brought home to me every Tuesday how incredibly inaccessible UK legislation is. It is made up of statutory instruments that amend statutory instruments that stand upon Acts that amend Acts that amend Acts. This is not a consolidation Bill but it is a great step forward. I congratulate the Government, the DTI and the draftsmen for taking so much of the 1985 Act, changing it and presenting it in a sensible and well written way. I have read about 50 of the 880 clauses. They are in plain language and stand by themselves, and I believe that this form and shape will make our debate in Grand Committee much more practical because we will all know more readily what each other is talking about.
	I want to talk briefly about Part 10, which I welcome. I particularly welcome the codification of general duties set out in Clauses 155 to 161. I disagree with the noble Lords, Lord Freeman and Lord Patten, that those clauses are not a good thing, and I very much look forward to the debate in Grand Committee clarifying what they mean. I hope that we will be able to persuade the noble Lords that they are no greater burden and that they are about certainty. My noble friend Lord Wedderburn brought out the point that they are based on certain common law rules and equitable principles. In other words, this code of conduct is what we have now but, to the average citizen, what we have now is obscure because it is in case law and common law and in the whole sense of equitable principles. It is for the Government, under questioning, to prove specifically that Clauses 155 to 161 will be no greater burden.
	I read those clauses and I think that I understand them. I particularly welcome Clause 156, which entails the principle of "enlightened shareholder value". However, Clause 156 is entitled, "Duty to promote the success of the company". The first requirement of the clause is to promote the company for the benefit of all members as a whole. Subsection (3) qualifies that by requiring the directors to take a long-term decision and have regard to the long term, the company's employees, the relationship with suppliers, the impact of the operations on the community, high standards of business conduct and acting fairly between the members. We will have to flesh out the hierarchy of those parts working together. There is some guidance in the Explanatory Notes on the clause. They state:
	"It will not be sufficient to pay lip service to the factors".
	Conversely, they state:
	"At the same time, directors are not required to do more than is practically possible in the circumstances of any particular business decision".
	Provided that that balance is right and that it works effectively and passes the test of adding no greater burden than is presently the case, I think that this is a good clause.
	The other clause that I welcome—once again, I look forward to listening to the debate that fleshes it out—is Clause 158. Far too often I have heard the argument that all directors are the same and therefore, by implication, they shall be equally knowledgeable and skilled. Clause 158 seems to me to set out that each director's skill and ability shall be reasonable and appropriate, which is not the same as saying that they will be the same as each other. Therefore, while you expect certain skills from, say, the finance director, the development director and the design director, from other directors you expect only the skills that they need to bring to the task that they do on that board of directors. I believe that that is a clarification and I hope that the debate will make it even more black and white.
	The codification will clearly be valuable to all directors. But one has to remember that, in a sense, there are two classes of director. There are directors of large companies and quoted companies. In the case of large companies, the support of legal advice will be immediately available to them. The directors of quoted companies, who are what one might call "professional directors", have a duty to ensure that they are well briefed on those duties. But the vast majority of directors in this country are directors of small and medium-sized enterprises. They may be family firms as small as my neighbour's tree surgery company right through to larger firms—not-for-profit firms that nevertheless work under the Companies Acts. Some companies are owned by charities. The people involved in such companies want a simple statement of their duties. I believe that these three pages of the Bill do provide a simple statement of those duties.
	I hope that in Grand Committee we will convince the noble Lords, Lord Freeman and Lord Patten, that the Bill does not add burden and that it creates certainty. My business experience is that, when you create certainty, you reduce costs and you increase effectiveness. I look forward to following the Bill through Grand Committee.

Lord Razzall: My Lords, in winding up from these Benches, first, I join in the universal acclamation of the noble Baroness, Lady Bottomley of Nettlestone. I did not realise that it was her maiden speech until I saw the list of speakers, but she undoubtedly showed the charm and effectiveness that were the hallmarks of her performances in another place.
	Secondly, I declare whatever interests need to be declared on this occasion. I am never quite sure what we are supposed to do but, to the extent that I am sure, I formally declare the interests that are set out in the Register of Members' Interests for this House.
	In welcoming the Bill, as I think all speakers have done so far, first I join my noble friend Lord Sharman and the noble Lord, Lord Hodgson, in saying how disappointed we are that this does not constitute a proper consolidation of company law. Those of us who spent 30 years practising as company lawyers would not agree with the Minister's reference to the fact that it is all right that we do not have a consolidation because, after all, we can always look it up in Butterworths. Those of us who have attempted to look it up in Butterworths over 30 years have found that it is not as easy as the Minister professes. Therefore I think that it is a matter for regret that the Government have not taken the time to introduce one codified piece of legislation that sets out company law in a consolidated form.
	I will not go through the many points that noble Lords on all sides of the Chamber have made, but I shall make one or two general points, and raise one or two detailed points that have not been touched upon. First, there is a concern in the speeches of a lot of noble Lords—and in briefings that noble Lords have had from both the CBI and the Law Society—that this legislation will introduce a novel concept into English company law: interference by the judiciary in the exercise of business judgments by directors. There has been a tradition in this country that our company law disputes are primarily resolved in ways other than litigation. There is a concern right across the board that the Bill is in danger of driving a coach and horses through that principle. It does so in three ways.
	First, on the director's duties under Part 10, we on these Benches, like most noble Lords, obviously welcome the concept of enlightened shareholder value and the idea of a director's responsibilities being more widely defined, as they are in this Bill. However, the difficulties which go to my general point are the imprecision in drafting, which we can probably deal with in Grand Committee. Moreover, many of us feel that the interplay between statutory obligations and common law remedies is likely to lead to a considerable increase in litigation, to the detriment of the corporate wheel.
	There is also real concern, which I share, over derivative claims and Clauses 239 to 246. These provisions, including the possibility of third parties being joined in proceedings, are likely to encourage the threat of litigation not only by shareholders but also by those who may not have regard to the long-term interests of the company and shareholders as a body. That is a concern that we will need to come back to.
	Thirdly, as one or two noble Lords have mentioned, there is a danger of litigation becoming commonplace in major takeover transactions for the first time, almost in the American style. In general terms, the law of unintended consequences is starting to be a problem. As the noble Baroness, Lady Bottomley of Nettlestone, said, there is a concern that the likely emphasis on litigation is going to discourage the pool of those from whom non-executive directors in particular can be drawn, at a time when all the other pressures on corporate governance are to increase that pool of talented people and the number of those who are prepared to take that function on. With the practice that is starting to happen in the United States and with UK individuals being asked to be directors of US companies, there is already, as a result of the Sarbanes-Oxley Act and related legislation, a serious reluctance to take on those responsibilities. We would not want that to occur here, particularly as a result of the passing of this Bill.
	Two other principles have been touched on by other noble Lords. First, I will not say that a number of people are "browned off" by the announcement of the cancellation of the Operating and Financial Review, because that would be a terrible pun—but they clearly are. The Chancellor of the Exchequer clearly thought that he was going to get the unanimous support of the City and business by announcing this measure. Of course, he had forgotten, as my noble friend Lord Sharman said, that most companies in the City had already spent large amounts of money and time in getting ready to comply with the Operating Financial and Review. Most of them were entirely happy to comply with it. If the Chancellor wanted to announce something to reduce the burden of regulation, he could have thought of one or two other things rather than this. As my noble friend Lord Sharman indicated, what was going to go in the Operating and Financial Review is going to go, for most listed companies, in other parts of the accounts in any event. That will be a requirement of the stock exchange listing agreement. We therefore think that that is a mistake on the Government's part.
	The second general principle is that we have concerns about the mechanism which the Government are choosing for amending this legislation. We understand the argument that the legislative timetable would be in difficulty if we said that we must have a major company law reform Bill every two or three years. However, there is dissatisfaction over the mechanism, and we will have to look at the detail of that in Grand Committee.
	Two or three points have not been touched on. First—and you might expect me to say this—this is an opportunity to get the law on the disclosure of political donations right, in particular the definition of a political donation. There are significant practical difficulties, not major issues of principle, in determining what is or is not a political donation. For example, when Sainsbury's goes to each party conference and sponsors a reception, does that constitute a political donation? There is some opaqueness in that and people are interpreting it in different ways. Is it for the benefit of Sainsbury's business and therefore not a political donation; or is it for the benefit of the party in question and therefore a political donation? There is an opportunity to tighten that up in Committee.
	Secondly—and I am not sure that anybody has touched on this important issue for smaller private companies—what are such companies allowed to do on offers to the public; in other words, the interplay between the rules regarding prospectuses and the rules under company law? The Law Society feels, as do I, that this is an opportunity missed to tighten up and clarify those rules.
	Finally, we on these Benches welcome this Bill. We are clearly going to have a lengthy time in Committee. In closing, I hope that the captains of industry who so often grace the Benches of this House by their absence will find the time to come and give us the benefit of their wisdom and experience in Committee. After all, that is why, we were told, they are here.

Baroness Noakes: My Lords, I start by reminding the House of my interests as declared in the register. In particular, I am a non-executive director of four listed companies.
	Today's debate has shown your Lordships' House at its very best. We have had some well-informed contributions from a number of different angles. For me, however, the high point was the maiden speech of my noble friend Lady Bottomley of Nettlestone. We all know of her outstanding track record in government, in health and, in particular, in national heritage. Today, however, we saw her reveal her in-depth knowledge of contemporary corporate issues. It was a marvellous speech and we hope that she will be joining us as we journey through the remaining stages of the Bill.
	My noble friend Lord Hodgson of Astley Abbots set out our general approach to the Bill in his opening speech and he welcomed the Bill in principle. He set out our three tests for the Bill. Is it really deregulatory? Does it make company law more comprehensible? Do the proposals strike the right balance? I am afraid that we cannot give the Minister 10 out of 10 on any of these tests. My noble friend referred to several areas which we will want to pursue in Committee. The Minister will have noted my noble friend's concerns about the powers in Part 31. Those concerns were shared by a number of other noble Lords. My noble friend Lord Freeman and the noble Viscount, Lord Bledisloe, were particularly robust on this matter. I was glad to hear that the noble Lord, Lord Wedderburn, also has concerns about it. The recommendation of the Delegated Powers and Regulatory Reform Committee was strong and clear, and we cannot brush that aside. We will of course return to the matter in Committee.
	Part 11, which deals with derivative actions, has also raised many concerns. My noble friend Lord Trenchard supported my noble friend Lord Hodgson in raising them, and the Liberal Democrat Benches share the same concerns. I foresee another heavy Committee sitting on that, as the noble Baroness, Lady Goudie, predicted.
	We are delighted that my noble friend Lord Freeman will be leading for us on Part 10 of the Bill. He made some powerful points in his speech about the new formulation of the duties of directors. The Government have said that the Bill largely codifies the law as it stands, but we are simply not convinced that this is the case. In answer to the probing question of the noble Lord, Lord Lea, it probably does change the law and we are not entirely happy about it.
	In principle, it is good to see that Clause 156 emphasises the duty of directors to promote the success of the company for the benefit of the members. That seems to be superficially attractive, but my noble friend Lord Patten exposed the complete lack of clarity in this formulation. Part 10 will receive the most careful scrutiny.
	My noble friend Lord Hodgson has already said that I will be leading for these Benches on Parts 15, 16 and 33; namely, those parts which deal with accounts, audits and auditors. Part 15 starts fairly uncontroversially by stating that, in relation to accounts, its main distinctions are between small companies and other companies, and between quoted companies and unquoted companies. Would that it were so simple. There are also distinctions between public companies and private companies. Medium-sized companies have some rules too. Part 16, which deals with audited accounts, also makes special provisions for dormant companies, for charities and non-profit-making companies subject to public audit, and a miscellany of other kinds of companies.
	The Bill really has not made this area very much more simple or accessible. It is not a trivial issue. If I were responsible for running a small or a medium-sized company, I would have to wade through 99 sections in Part 15 and a fair part of the 72 sections in Part 16 before I was sure of my obligations. That is an unnecessary bonus for accountants and lawyers, and it certainly does not contribute to deregulation.
	The Chancellor of the Exchequer has, somewhat dubiously, already claimed his deregulatory credit for the amendments to Part 15, which we will be expecting in due course, in relation to the OFR. A number of noble Lords have spoken about that. My noble friend Lord Hodgson and the noble Lord, Lord Sharman, have already queried exactly what the Government intend. Will it be the business review requirement under the European directive or will it go further? Companies need some certainty on this. Having already made one abortive attempt at gearing up to meet one set of requirements, they need to know what is expected of them.
	We have heard a number of views today about the OFR. I confess that, somewhat unfashionably, I have never been convinced that there was sufficient evidence of benefit outweighing cost to justify a statutory requirement. Indeed, I had intended to table amendments to take the OFR out of the Bill in order to debate those issues.
	Whatever the precise form of the amendment when we come to consider the Bill in Committee, there will be a need for a business review—we know that much—and we know that that will require companies to make forward-looking statements. We agree with the CBI and others that a safe harbour provision is necessary to allow meaningful statements to be made by directors in this area.
	We particularly welcome Clause 366, which states that accounts are to give a true and fair view. This might seem a small point, but its absence as an explicit requirement was a source of potential problems when international financial reporting standards were introduced, but it is a pity that the even bigger problem that is affected by IFRS—namely, distributions, to which the noble Lord, Lord Sharman, referred—has not been dealt with in this Bill. We will want to look at that in Committee.
	So far as the rest of Part 15 is concerned, we will want to return to various aspects during the Bill's passage; for example, the new duties on directors in relation to directors' reports and the new duties on quoted companies in relation to websites. We will be looking in particular at the practical issues that arise in these areas.
	The Minister will not be surprised to find that the new provisions in Part 16, which restrict the liability of auditors, will be a focus of attention. There has been much rejoicing among auditors over Clause 518. While I do not believe that there is much objection to the principle, there are a number of practical issues to consider and to which I am sure we will return in Committee. In particular, we need to understand why the Government have not drafted explicitly for proportionate liability, because that is what we understood to be the agreement between all the parties who had been involved in the discussions about auditor liability during many months and years.
	I have one question for the Minister on this clause. When the Bill was published, his right honourable friend Mr Alun Michael was reported to have said that audit fees would be expected to fall once auditors had successfully limited their liability using this new facility. This is a matter of some concern to companies which have been faced with audit fees ratcheting upwards in recent years. I hope that the Minister will indicate what information the Government have on the cost/benefit equation as it affects audit fees.
	As we have already heard, auditors' rejoicing over liability limitation has been counterbalanced by their dismay at the new criminal offence of recklessly giving an audit report, as set out in Clause 494. We are not convinced that the concept of recklessness in the absence of dishonesty has any place in the scheme of offences under the Bill. However, offences based on recklessness for directors already exist, and it would be easy to conclude that even-handedness requires that auditors should be subject to similar requirements, but I am not sure that the public interest is necessarily served by this. A number of practical issues arise; for example, the interaction between the individual auditor who signs the accounts and his firm; between the criminal law process and the independent disciplinary arrangements that already exist. These interactions may impede achieving the desired outcome, which I assume is to stop the auditor concerned carrying out any more audits. We all need to look at this matter very carefully during the passage of the Bill.
	The final part which I shall address is Part 33, which deals with statutory auditors. This is a part of the Bill which I believe even auditors do not find very exciting. We definitely welcome the Government's long-overdue implementation of the report of the noble Lord, Lord Sharman, and their allowing the Comptroller and Auditor General to audit the accounts of companies. Without in any sense qualifying that welcome, I give notice that we will want to examine the detail of that when we reach the later stages of the Bill. We will want to ensure in particular that the supervisory arrangements that have been specially created for the Auditors General are completely independent of them. The Minister will be aware that the current Comptroller and Auditor General is currently the chairman of the public oversight body for auditors, which is, as I understand it, likely to carry out the supervisory tasks set out in Part 33.
	Lastly, I return to the Bill overall. My noble friend Lord Hodgson and other noble Lords have already referred to the way that company law will continue to be scattered over several Acts once the Bill is enacted. We simply do not buy the argument that users are content with that and are happy to carry on purchasing the Butterworths book in order to get some sense of how the legislation fits together. I simply give the Minister notice today that we will wish to return to this issue during the passage of the Bill.

Lord Sainsbury of Turville: My Lords, all noble Lords who know the noble Baroness, Lady Bottomley of Nettlestone, expected a fine maiden speech and, of course, we were not disappointed. She is the daughter of John Garnett, who was a behavioural scientist for many years, and she was a very distinguished Secretary of State for Health and for National Heritage. She brings much experience, as well as charm and intelligence, to the House, and I know that in future we will greatly benefit from it.
	Many interesting and important points have been raised today, from a number of different perspectives. The Bill has been the subject of extensive consultation with business, the legal and accountancy professions and other interested parties and today's debate has shown that it will continue to attract a high level of detailed and expert scrutiny during its passage.
	This is obviously a complex Bill. Before dealing with the key points raised in today's debate, I would like to comment on two issues, both raised by the noble Lord, Lord Hodgson, which are relevant to how we handle the Bill in Committee. The first issue is regulations and how we plan to use the powers in the Bill. Much company law is still set out in primary legislation, but the Bill contains roughly 130 substantive individual provisions for delegated legislation, of which about half are new powers to make regulations, and the rest amend, re-enact or restate existing powers. We have used subordinate legislation for a number of reasons; for example, to avoid putting detailed technical provisions on the face of the Bill; to ensure flexibility in responding to changing circumstances, especially technological advance and greater international mobility; and to allow the registrar of companies to make the detailed rules associated with delivering and filing documents.
	In a number of areas we have already published detail on the regulations which are planned. For example, we published draft model articles for private companies for consultation in March last year, and will publish drafts for public companies during the passage of the Bill. The Takeover Panel similarly published, in November 2005, full details of its proposals for the use of the rule-making power to be extended to it in relation to takeovers and other regulatory matters.
	It must also be stressed that there are a number of powers contained in the Bill where the Government have no current plans to make regulations. They are included to maintain flexibilities and to anticipate future developments, or to act as a back-stop in case market developments do not in themselves deliver the changes which we want to see made. The Government would expect to consult should it become necessary to use these powers in future. I will come later to the proposed company law reform power.
	The second issue is the change of words from the 1985 Act and where a change of wording is a matter of substance, and where it is merely cosmetic. This was also raised by the noble Lord, Lord Hodgson. Our underlying approach in this Bill has been to simplify. Sometimes this has been a question of making substantive changes of policy, and sometimes it has been more an issue of simplifying the drafting of the law to make the language more accessible or consistent, or to reorder the provisions in a more logical way. This approach has been widely welcomed, and I am very pleased that the reactions we have had from stakeholders to the new Bill suggest that the draftsman has been remarkably successful in setting out the law in a way which is as clear and accessible as possible.
	But I recognise that there can sometimes be questions as to whether a particular change in the language represents a change of substance, with real legal effect, or is a change in language. My department has produced a table of destinations and derivations, showing for each clause in the Bill where it derives from an existing section of the 1985 Act or elsewhere and, if so, whether it introduces a change of substance or is more by way of a simple restatement of the existing provision. That document has been placed in the House Library and is available on the DTI website. I hope it will be of some assistance.
	Of course, we will come at later stages in the House to discuss individual clauses in more detail. If and when it would be helpful to remove doubt, I will, of course, be very happy to set out the position in respect of specific provisions in more detail.
	I would now like to comment on some of the key issues raised during the debate. The Bill has more than 800 clauses and the debate involved 21 speakers who raised more than 100 questions, so I cannot answer all of them. I shall try to cover the fundamental issues in the Bill and we will have plenty of time in Committee to cover the detailed points.
	I shall start with directors' duties, which are at the heart of the Bill. The noble Lords, Lord Clinton-Davis and Lord Freeman, raised the accessibility of law on directors' duties. Codification will help to make the law clearer, but we also need to make the law more accessible to the thousands of directors who, quite understandably, will not read companies legislation, however elegantly or clearly drafted. That is why we are also committed to producing plain language guidance which will be made available to all directors.
	Clause 156 addresses the key issue of in whose interests a company should be run. The clause enshrines in statute a concept which the Company Law Review called "enlightened shareholder value". This has two main elements: it gives directors the clarity they need by setting as their objective the success of the company for the benefit of shareholders collectively and, at the same time, the clause recognises that a focus on the short-term financial bottom line cannot deliver long-term prosperity. Directors, in fulfilling the duty, are therefore required to have regard to factors such as the long-term consequences of their decisions, the interests of employees and the impact on the community and the environment "so far as reasonably practicable".
	I am aware that some noble Lords would prefer an approach which the Company Law Review called "pluralism", and I believe that that is the direction in which the noble Baroness, Lady Tonge, and the noble Lord, Lord Judd, were heading. Under it, directors would be required to serve a wide range of interests. Both the Company Law Review and the Government have considered the case for a "pluralist" approach very carefully. There are three main reasons why we do not believe it would be the best way forward: a pluralist approach would muddy the waters unhelpfully; directors would lack clarity about what they were meant to be doing; and it would, in practice, be more difficult for anyone to hold directors to account. Secondly, company law reform is not a suitable vehicle for our wider agenda on corporate social responsibility. Issues such as environmental protection and health and safety are very important, but they should not be addressed through company law reform. The best way to promote responsible business behaviour is to show how such behaviour leads to business success.
	The noble Lords, Lord Sharman and Lord Clinton-Davis, and the noble Baroness, Lady Bottomley, raised the issue, and the noble Lord, Lord Lea of Crondall, noted the significance, of the words "so far as reasonably practicable" in Clause 156. They have a dual purpose. First, we recognise that business decision-making will sometimes be constrained by time constraints and other practical limits. That does not, of course, mean that directors can simply ignore factors such as the interests of employees, and it is hard to conceive of any situation, even the most urgent, where it will not be reasonably practicable to give any regard to the factors at all. The words also make clear that directors must consider the factors to the greatest extent that it is reasonably practicable to do so. It is, of course, in the company's interests that they should do so. The duty of directors is not to consider the factors in a superficial manner as part of a box-ticking exercise, but to think through the long-term implications of their decisions and address potential risks.
	I believe that our approach in this clause responds to wider expectations of responsible business behaviour in a pragmatic and commonsense way. The clause does not impose new duties on directors, and the duty to promote the success of the company will continue to be governed by the good faith judgment of the directors. The courts should not be any more likely to second guess business decisions taken in good faith by directors.
	The Bill will codify the common law duty of care, skill and diligence without substantive amendment. Recent developments in the law in this area have been influenced by Section 214 of the Insolvency Act 1986, and Clause 158, which introduces a statutory duty to exercise reasonable care, skill and diligence, closely follows this section of the Insolvency Act. The Bill does not make this duty more onerous. On the point from the noble Lord, Lord Borrie, we do not think it will affect director recruitment or behaviour.
	My noble friend Lord Haskel asked for an assurance that the deregulatory measures in the Bill will in no way diminish the duty of care owed to the company by directors of small companies. I am happy to give that assurance. The noble Lord, Lord Patten, asked what the success of the company means and who are its members. Success for a commercial company means, normally, long-term increase in value. For certain companies such as charities and community-interest companies it means achievement of their objectives. Members is a company law term to cover shareholders and guarantors of companies limited by guarantee. It does not include employees.
	The position of auditors is another major issue in the Bill. The noble Baroness, Lady Goudie, argued that the threat of criminal prosecution will cause all auditors to carry out more checks and be less willing to exercise judgment. There is no reason why they should. If an auditor is not acting recklessly at present there is no reason why they should change their behaviour because we are introducing this offence. The noble Baroness asked for an assurance that honest mistakes would not result in prosecution. I can give that assurance, not because dishonesty is required for committing the offence—it is not—but because to show that an auditor has acted knowingly or recklessly requires more than a mistake. It requires a conscious decision by the auditor: at least a decision to turn a blind eye. It is possible that some auditors may misunderstand the risk of prosecution, and that this could have adverse consequences. We will be happy during our further consideration of the Bill in committee to explain fully what will be the effect of the phrase "knowingly or recklessly", and of the provision as a whole, so as to help avoid such misunderstandings.
	Our proposal on auditor liability addresses the perceived unfairness that can arise when the negligent auditor is the only solvent defendant after a corporate collapse. It could prevent the loss of one of the big four accountancy firms. On the other hand, it gives the company and its shareholders the option whether to agree to a limitation. If they have agreed, the proposal still ensures that the company has a right to a fair and reasonable compensation from the auditors. The noble Baroness suggests that the Bill as drafted requires a liability limitation agreement to define the limitation as a monetary amount. It does not. The Bill leaves company and auditor free to contract in whatever terms they want. If they were to agree to limit liability to a specific financial limit, it would not be effective if it was not at least fair and reasonable, and the limit would instead be what was fair and reasonable. Having been a finance director for many years, any prediction that audit fees will come down in any circumstances strikes me as incredible. We believe that the clause as drafted will enable the court, if necessary, to determine an amount that is proportionate. It will be able to strike a fair balance between the company and the auditor, taking into account the auditor's responsibility to the company.
	The Operating and Financial Review was raised by many noble Lords. Our reason for removing the requirement was that the costs associated with it were, we believed, disproportionate. It was about £33 million, of which £31 million was extra audit requirements. I agree with my noble friend Lord Gordon of Strathblane that we have got to the right place but not necessarily by the most elegant route. Companies will still need to include a business review as part of the directors' report, in compliance with the EU Accounts Modernisation Directive requirements. We are committed to improving strategic, forward-looking narrative reporting by companies, and to enhanced dialogue with shareholders based on such reporting. It is important for companies to report on non-financial issues relevant to the development and performance of the business, including, for example, environmental and employee matters. Companies will be required to do this as part of the business review.
	As I explained in my opening statement, we have invited views by 15 February on whether the business review requirements should be clarified to achieve their objectives more effectively. We will take full account of these views on deciding how to frame the amendments we will be bringing forward to the Bill relating to these provisions. Depending on the timing of the Committee stage, we may bring forward amendments either at Committee or Report. In response to the question of the noble Lord, Lord Hodgson, it is our intention to bring forward amendments to the Bill to remove Clauses 393 to 395 as they currently stand.
	The noble Lord, Lord Hodgson, and the noble Baroness, Lady Murphy, raised the issue of shareholders' rights. The Government are committed to encouraging the greater enfranchisement of shareholders and the responsible exercise of share ownership rights. That is why the Bill includes new provisions under Clauses 136 and 137 to ensure that companies can enable indirect investors—such as those investing through nominees—to exercise and enjoy varying levels of shareholder rights as suits their needs. The Government believe that a voluntary approach is the better way to achieve greater enfranchisement of indirect investors. However, if the market does not develop appropriate solutions the Secretary of State may exercise the power under Clause 137 to compel companies to provide information to indirect investors. The power is intended as an additional tool towards encouraging and achieving greater enfranchisement benefits. Better-informed investors should be better equipped to demand voting and other governance rights from nominees and the companies in which their investments are made.
	My noble friend Lord Haskel suggests that companies taking advantage of the electronic communications provisions should automatically be required to enfranchise nominee shareholders. The extension of governance rights to indirect investors and the provisions enabling companies to default to e-communications are entirely separate measures. E-communications present great opportunities not only to reduce costs, but also to enhance the immediacy of dialogue between companies and their shareholders and indirect investors. However, to make enfranchisement of nominee shareholders mandatory would require a definition of exactly which indirect holders should be enfranchised—which would be difficult. We would therefore prefer market solutions to develop but, if they do not, the power will be available.
	The noble Baroness, Lady Murphy, asked what would be an improper use of the register of shareholders. A current issue here is the use of the register of shareholders by animal rights extremists to harass shareholders. That has been a major problem. We have dealt with it as a one-off, but there are other areas where similar activity could occur and we want also to be able to deal with that.
	The noble Lord, Lord Sharman, and my noble friend Lord Borrie raised the question of the rules on dividends. My noble friend Lady Goudie also argued that we should expand the Bill to include provisions relaxing the law controlling the payment of dividends by private companies. We understand the concern about current law that links payment of dividends to the concept of realised profits, but the rules on dividends and other distributions are of central importance in protecting creditors and other third parties involved with companies, including lenders, employees, pensioners and trading partners. We see no obvious or simple answer to that complex and important issue. We need to consider it carefully and we intend to do so in full consultation with interested parties.

Lord Sharman: My Lords, will the Minister reflect on my suggestion that dividend distribution policy should be based on a solvency test, which is a simple test: can you afford, in cash terms, to pay the dividend? It is not a structural test, it is a solvency test: can you afford to pay it? That is what is done in the United States.

Lord Sainsbury of Turville: My Lords, we will certainly reflect on that. There are perceived difficulties with that approach, but we will certainly reflect on that and then propose any changes using the proposed reform power in the Bill.
	I now turn to the reform power, which is clearly a major issue in the Bill and an extremely difficult one. It may be useful to go over the underlying rationale for the proposed company law reform power. As I said, it is usual these days in technically complex areas of law to leave the detail of the provisions to subordinate legislation, but company law has grown over the centuries and many of even its most detailed provisions are written in primary legislation. That creates a challenge when updating the law to reflect a changing business environment. Although it may be relatively easy to secure parliamentary time for a Bill where a change of the law is essential, it can be more difficult in cases where the proposed reform is useful and desirable but where existing law can, at a pinch, limp along as it is.
	An interesting example of that is the 1989 court case known as Aveling Barford, which cast doubt on when a company can make an intra-group transfer of assets at book value. The Bill removes those doubts. That is an example of where it has taken a long time to get parliamentary time.
	We recognise that the power that we have suggested raises important issues. We have designed it as a super-affirmative power, incorporating stringent conditions as to how it can be used, including extensive requirements for public consultation and parliamentary scrutiny. To a large extent, those requirements reflect the existing arrangements of the Regulatory Reform Act 2001 and are intended to provide demonstrable and effective safeguards surrounding what can undoubtedly be seen as a very wide and novel power. Notwithstanding those safeguards, important concerns have been raised. As I said, the Delegated Powers and Regulatory Reform Committee and the chairman of the Constitution Committee raised a number of such concerns and make some powerful arguments. Those committees always, rightly, command the greatest respect in this House and it is important that we reflect on their comments and those that the noble Viscount, Lord Bledisloe, made this afternoon. We consider them seriously; I assure the House that the Government are doing exactly that.
	I believe that the underlying rationale behind the proposal remains compelling. We very much want to achieve an effective and constitutionally appropriate mechanism for necessary changes in future. I hope that we will be able to find such a way through, which can command the support of the House. I have already found today's debate hugely informative and I look forward to further debates that I am sure we shall have at the Bill's next stage.
	I remark on two points that were raised in connection with that. The noble Lord, Lord Sharman, asked whether reform powers will require affirmative resolution and whether consultation will be wide. I can confirm that, in addition to the special period for parliamentary scrutiny in which we envisage that Special Committees of both Houses will scrutinise proposals in detail, the Bill also provides for affirmative resolution of orders. I also reassure the noble Lord that full statutory consultation will be necessary before a proposal is made, involving representative interests likely to be substantially affected.
	My noble friend Lord Clinton-Davis raised the question of the Government needing to take account of consultation before bringing forward a company law reform order. The Minister will need not just to take account of consultation but, as is clear from Clause 785, to summarise the outcome and what account has been taken of it in the document, which we would have to lay before Parliament.
	I think that I dealt with the question of consolidation in my opening speech and explained why that is rather a mythical goal to be striving for. We could take the capital maintenance regulations of the 1985 Act and consolidate them in the Bill. That would change some of its wording, which people do not want to see—particularly in view of the fact that, almost certainly, a new Bill will have to come forward with capital maintenance regulations. So, even if we consolidated it briefly now and made people look at some new legislation, we would then simply have an unconsolidated Bill as soon as we brought in the capital maintenance. I cannot see that this is a particularly profitable way to do it. When we push people on this issue we find that everyone is in favour of consolidation, "but not in my lifetime". That is a perfectly understandable proposition. But, when it comes to the crunch, you have got to make a decision, and we think we are reflecting what people really want to see.
	I believe that there is general agreement about the many issues in the Bill although there are some concerns about particular matters. I also believe it is largely a technical Bill and not controversial in party terms. Nevertheless, company law represents a balance of different interests—this has been reflected in the points of difference that have been raised today—and the Government's responsibility is to provide a legal framework which reconciles these interests and provides a means of accountability for the exercise of corporate economic power and the safeguards and remedies for abuses of that power. It is an important Bill which will help to ensure that our company regulation and financial markets continue to be regarded as amongst the best in the world. I look forward to detailed debate in Committee.
	On Question, Bill read a second time, and committed to a Grand Committee.

London Olympic Games and Paralympic Games Bill

Lord Davies of Oldham: My Lords, I beg to move that this Bill be now read a second time.
	We will hear many interesting and compelling speeches in this debate today. One voice we shall miss, however—which would have been heard but for his untimely death—was that of Tony Banks, Lord Stratford. He spoke to me before Christmas of his relief that this debate had been postponed so that he could express his very great enthusiasm for the Bill and his pride that his area of London would be the major site for the Games.
	He would not only have spoken well in this debate but would have brought to our forthcoming work the real experience he gained when fronting our bid for the football World Cup several years ago. That experience would have been invaluable, communicated by his capacity for directness, his wit and his intelligence. As a former Sports Minister he had so much to offer in this work. But also, of course, he had an interest in the arts and in the general work of the House, which I know in his short time here he had grown to respect.
	London won the Olympic bid because we promised the International Olympic Committee that we were able to deliver. Since July, we have made good on that promise. A huge amount of progress has already been made towards 2012. Compulsory purchase orders have been issued to acquire the land needed in east London; the first contracts have been let to get power lines underground in the area that will become the Olympic Park; an interim Olympic Delivery Authority has been created and the top management team appointed; and the London organising committee for the games has been formally established under the able leadership of the noble Lord, Lord Coe.
	The IOC visited London last November and professed itself extremely happy with the progress we were making. In its view, we are currently two years ahead of the schedule of any previous host city. It was particularly impressed that we had already made such good progress with this Bill.
	We could not have made that progress without the help of the Opposition parties. Their support, both for the bid and the work that we have done since, has been unremitting and I thank them for that. I am confident that it will continue—I certainly hope that it will continue—as the Bill goes through the House. It is vital that we get this legislation to Royal Assent as quickly as possible, to put the ODA on an operational footing and to begin the hard work that will be needed to get everything built on time and on budget.
	The Bill does three things, all of which are essential to our success. It establishes the ODA and gives it the powers it needs to get London ready to stage the Games; it provides the powers needed to meet IOC requirements about the way in which the Games and the Olympic environment are managed; and it tailors the powers of other bodies, including the Greater London Authority and regional development agencies, where they have a role in the Olympic project.
	We are also concerned, and were concerned in the other place, to give reassurance about some crucial difficulties surrounding the Bill. We wanted to give clarity and reassurance on how restrictions on ambush marketing will work and who will or will not be caught by these rules. We think we have clarified these matters through the amendments passed in the other place, but we will have time, during Committee, to examine more thoroughly what I recognise to be an interesting and challenging area.
	The first half of the Bill deals with the ODA. Clauses 3 to 7 establish the ODA and give it the powers, functions and duties it needs to get London ready for the Games. They include a duty to have regard for the legacy of the Games in everything that is done, and a duty to contribute to sustainable development. It is important not to lose sight of the unique selling point of London's bid, namely the legacy that the Games will bring to the United Kingdom in terms of sporting facilities and participation, and in the complete regeneration of one of the most deprived areas of London.
	Clause 5 allows the ODA to be appointed as the local planning authority for the Olympic Park, on the same model as an urban development corporation. That should ensure a co-ordinated approach to the development of the park and reduce the risk of unnecessary delays to the project. The precise boundaries of the ODA's planning powers will be determined by order and of course there will be consultation on that order early this year. Clause 6 requires the ODA to have regard to security in exercising its functions; all noble Lords will recognise how important this dimension is to the successful prosecution of the Games.
	Clauses 10 to 18 deal with transport and establish the ODA as co-ordinating authority for the Olympic transport plan. Existing transport authorities will have a duty to co-operate with the ODA in order to implement this plan and to deliver Olympic transport services. The Bill provides for the creation of an Olympic route network, and the ODA will be able to issue traffic regulation orders on that network.
	The ODA's role will, of course, evolve over time. It has the important job of constructing the venues and planning transport in the run-up to 2012. It will then co-ordinate transport systems during the Games, and will manage the environment around venues, so that the streets are clean and the Games are not commercially exploited. After the Games, the ODA will take a role in reconfiguring the venues, but that is its final responsibility. It will essentially be a time-limited body, focused on delivering the London Games. Clause 9 therefore provides for the Secretary of State, having consulted the Mayor, to lay an order to dissolve the ODA.
	The second half of the Bill deals mainly with the measures needed to meet the IOC's requirements for what it terms brand protection. We signed up to meet those requirements when in bidding for the Games. We are therefore bound, under the host city contract, by the IOC's technical manual on brand protection. We have put a summary of the relevant sections of that manual in the Library. Clauses 19 to 30 allow for regulations to be made controlling outdoor advertising and street trading in the area around Olympic venues. I recognise that this is an issue we will wish to explore in greater detail in Committee.
	Clause 31 outlaws ticket touting in connection with the Olympics. Again, this provision is brought in because the IOC requires that ticket touting be prevented. In bidding, London accepted the nature of those requirements. Of course, I am aware that other sporting bodies argue that there should be a wider ban on ticket touting. We in the department are currently working with all sectors, including sport, the arts, the creative industries and other stakeholders to gather evidence about touting practices across a wide range of areas. However, the IOC makes the Olympics a special case and we are under an obligation to meet that.
	Clauses 32 and 33 and Schedules 3 and 4 provide for the protection of Olympic intellectual property. They stop businesses unfairly cashing in on the Olympic or Paralympic Games by wrongly implying that they have some form of commercial or contractual association with the Games. These restrictions are designed to protect the public image of the Games, but they also protect the public purse by maximising sponsorship income.
	Existing legislation already prevents any unofficial commercial use of the word "Olympic" and the Olympic rings, and the main aim of Schedule 3 is to provide equivalent rights to the Paralympics. Schedule 4 extends protection to other, more imaginative forms of association and ambush marketing. But, contrary to some press reports, it will not place a blanket ban on using words such as "summer" and "games". Factual references to London and to the Olympics will still be perfectly legal. So will explanations of the purpose or characteristics of any goods or services. So will editorial use in media coverage.
	In its final clauses, the Bill provides new Olympic-specific powers for the Greater London Authority and the RDAs to ensure that they can make the contribution that we require of them. Clauses 34 and 35 give the GLA a specific power to prepare for the Olympics because it was the Mayor of London, along with the British Olympic Association, who signed the host city contract with the IOC. So to provide absolute clarity that the Mayor is able to honour his commitments, the Bill makes it clear that he and the GLA have the power to comply with his obligations under the contract and to prepare for and manage aspects of the London Olympics. There should be no need for this power after the Games, and Clause 35 therefore provides for it to be switched off by the Secretary of State. A similar power is given to RDAs in Clause 36.
	The Olympics present us with a wealth of opportunities. We need to make the most of them. In 1948, with the world still recovering from war, London put together a memorable Olympic Games when no one else was able to. For 2012, expectations will be much higher. And no one has higher expectations than the residents of east London. That was clear in their enthusiastic reaction to our victory on 6 July. We must make every effort to make the Olympic dream come true for those people and for the whole of the United Kingdom. The Bill is the first step towards success. I commend it to the House.
	Moved, That the Bill be now read a second time.—[Lord Davies of Oldham.]

Lord Glentoran: My Lords, Tony Banks was somebody I never met, but he was one of the world's great characters. He was into everything, a leader, a player, a sportsman and probably, reading about him, a tease. I wish to associate myself and my party with the remarks made by the noble Lord, Lord Davies, and my own personal tribute to Tony Banks.
	We as a nation have been charged with the welcome task of delivering the world's largest sporting spectacular event, the Olympic Games, in 2012 and boosting its sporting profile worldwide. The eyes of the world will be monitoring our preparations to a greater or lesser degree from today until the summer of 2012. I take this opportunity to congratulate my noble friend Lord Coe, his team, Tessa Jowell, the DCMS team, and all those involved, on their achievement in winning the nomination for Britain.
	The Bill we are discussing today, and throughout its progress, is essentially a stepping stone to enable a successful delivery of this event. I want to make it clear at this stage that we on this side of your Lordships' House have the same objective as Her Majesty's Government—to deliver the most successful, friendly and financially beneficial Olympic Games yet run. Our objective in these debates will be to improve the Bill and in no way to destroy or damage it.
	The Bill as it appears in this House is fundamentally sound, but there are a few concerns I should like to raise. Most of these were also raised by my honourable friend Hugh Robertson in another place, so they will come as no surprise to the noble Lord.
	There is the issue of accountability to Parliament. The London 2012 Games is a national event and should not be made into an unnecessarily political one. The ODA and other Olympic bodies are accountable through the Secretary of State to Parliament, but Parliament must maintain accessibility to this process. I suggest that an annual update of progress, issues and costs, with an opportunity to debate outstanding or new concerns, would be appropriate.
	There is a very real prospect of a considerable economic boost for sport and tourism across the country. Ours was a bid for the Games that will reach beyond the closing ceremony and we must deliver on that for the regeneration of the Lea Valley, the new world-class venues for sport, the boost to tourism and a heightened passion for sporting achievement at all levels.
	There is also the issue of partnership. I have already mentioned that we wish to maintain a cross-party consensus, something particularly pertinent when considering the extensive powers that the Bill grants to the Mayor of London. The powers are unprecedented and, therefore, potentially dangerous and controversial. To deliver a project of this size and scale, we accept that he will need to have extraordinary powers, but under the Bill he could decide, for example, to buy compulsorily the Centre Court at Wimbledon. Therefore, will the Minister look at how those boundaries might be policed? The Mayor has been known to push at the boundaries of his power and it is essential that in no circumstances should he be allowed to use the Olympics as a pretext to exercise powers that are not explicitly and directly related to the Olympic Games of 2012. It is vital that the Mayor works in close partnership with the ODA and the boroughs and that they endeavour to achieve their targets without resorting to unnecessary force or bullying.
	London 2012 has to be a Games for the athletes, run and supported not just by the Government but also by the Opposition parties, whoever they may be. The fact that London is hosting the Games is sure, but although we expect to be in power in 2012, that is not sure.
	That brings me to the costs and who will cover any overrun should there be any. That problem has been widely debated in the national press. The memorandum of understanding signed by the Government in 2003 clearly puts the responsibility on the National Lottery and the London council tax payers. There is a real possibility, given the history of other Games, that the 2012 Games will cost more than has been budgeted for. It is said that Sydney and Athens ran far more than 100 per cent overspends, although the new good news is that LOCOG is anticipating a surplus for 2012. In the event of a deficit, why should Londoners be expected to pay for any cost overrun for this national event?
	The Government and the Mayor have agreed a funding package of up to £2.375 billion to meet the cost of staging the Games, including support for elite support and associated sports investments. That includes £1.2 billion in contingency. I suggest that it is vital that the nation understands how that money is spent and how much goes into long-term infrastructure, housing, sporting, transport and other things. We need more clarity about the proposed final cost allocations. There is considerable concern among sports governing bodies regarding the importance of financing their seven-year plans on the road to London 2012. I very much hope that that issue will be revisited in the course of the debate.
	If we are to move from 10th in the medal table to the aspirational target of fourth, announced by the British Olympic Association, it is vital that our young Olympians of tomorrow are able to rely on the finest coaches and support services in the world. I hope that the absence of eagerly awaited funding from the Pre-Budget Statement of the Chancellor will not be paralleled by a similar lack of initiative and action on behalf of our sports people in the Olympic Bill. I seek the Minister's assurance that we shall not have to wait until the next Budget before our sports governing bodies are adequately financed for the task in hand.
	We hold very real concerns about the draconian constraints to the advertising industry. The Bill sets out powers to protect the Games from unauthorised commercial exploitation and ambush marketing. While that is understandable, when considering the sums of revenue that need to be raised by LOCOG and the need to maintain the value of the advertising and merchandising to LOCOG's top sponsors, I believe that the timeframe and the restrictive nature of the Bill remain overzealous.
	These restrictions are set to be in place a matter of months after the Bill is passed and continue for the next six and a half years. The Sydney Games only put such measures in place four years in advance, is it therefore strictly necessary for London to impose them for an additional two and a half years?
	We are also concerned about the presumption of guilt in this regard and the proposed legislation goes far further on this agenda than the IOC recommends—why? Will Her Majesty's Government give the House an undertaking that they will give greater clarity on all these issues to those affected by advertising restrictions within a time frame that they, the marketeers and advertisers, can work to. We are aware of the huge costs in time and money that are incurred in advertising and marketing programmes. We must give businesses adequate protection and guidance in good time if we are to retain their good will.
	I am also concerned that the Secretary of State has the power to change the prohibited "words" at any time by affirmative order. That creates a risk of some advertisements being pre-vetted and allowed airtime and space under one set of rules, and subsequently found to be illegal by a second set of rules. Will Her Majesty's Government assure us that this matter will be addressed and clarified, especially in Schedule 4 to the Bill?
	While the Bill goes to great lengths to protect the London Olympics from over exuberant advertising, it goes to no lengths at all to monitor or control gambling in relation to the Games, which can, it has been seen in recent weeks, threaten the integrity of sport. I seek acknowledgement of this issue from Her Majesty's Government and ask the Minister to inform us how this potential problem might be addressed.
	I now raise the small but very important issue of compensation for the businesses in the lower Lea Valley. There are a group of 284 businesses—although I read in my newspaper a few days ago that there were 300 claimants—all of whom stand to lose business from re-location. I understand that the compensation they are being offered is allocated on a pre-bid land value basis. However, they will have to purchase on a post-bid basis when the market will have changed dramatically. Added to this is the inconvenience of re-locating. We feel that this is not being handled fairly or well by Her Majesty's Government. They will tell me that it is up to the Mayor, but I do not accept that. The ODA must win the support of the nation and must not appear to be a "bully". The Minister must re-assess the manner and values in which sensitive issues of compulsory purchasing are approached.
	The Minister mentioned security. I fear that the euphoria of winning the bid will forever be linked with the disbelief and horror of the terrorist attacks which took place less than 24 hours later. It is something of a surprise that there is no mention of security provisions in the Bill and I ask the Minister to clarify the Government's position on this, and how they see the additional costs of security in 2012 being covered.
	Then there is the issue of tax—the tax take on the Olympic lottery game. If the expected value of money to go to the Olympics through the lottery is £750 million, the total sales from the Olympic lottery games will be £2,680 million. This means that the total amount taken by the Government in lottery tax duty will be £321 million. Surely that says something about the Chancellor's attitude to the games. The tax should be returned to LOCOG forthwith.
	Lastly, let us turn to the reforming of the structure for the provision of grass roots sports. This needs a radical overhaul in order to develop and find future generations of gold medallists. I have drawn attention in various debates on sport in your Lordships' House to the ridiculous level of bureaucracy which hampers the progress of our sports clubs; now is the time to re-structure for the 22nd century the bureaucratic management of sport in this country. My noble friend Lord Moynihan and Kate Hoey in their excellent report Raising the Bar go a long way to suggest how this might be done. This is a Games for elite athletes at the highest level, but its scope and impetus must be carried forward and used to deliver on the wider sports agenda.
	We have before us the opportunity to achieve a unique and remarkable sporting celebration, but we need to get it right from the start. Seven years is not a long time; however, I am sure that with continued cross-party support and accountability we will deliver.

Lord Clement-Jones: My Lords, I thank the Minister for his introduction. I, too, wish to associate myself and the Liberal Democrat Benches with the tributes to and comments on Tony Banks—Lord Stratford—from the Minister and the noble Lord, Lord Glentoran. All sides of the House and the general public are much poorer for his sad, sudden death. He was a true Londoner and a great supporter of sport in this country; our debate is a fitting time to mention him with enormous affection.
	We have truly all been waiting with some anticipation for this Bill, not only today but on a previous day. It is a pity—although I dare say he may not have had the patience to wait—that the noble Lord, Lord Coe, is not in the Chamber to receive personal congratulations. Gaining the Olympics for London was a massive achievement; the Prime Minister, the Secretary of State, and all those involved deserve great credit for having secured them. I saw a rerun of the announcement in Singapore not long ago, at the CBI dinner, and again at the "Sports Personality of the Year" awards on the BBC. It is very watchable, isn't it? I could keep rerunning that tape for quite some time.
	On the Liberal Democrat Benches, and in my party generally, we strongly support the Olympics as a huge potential boost for London's economy and infrastructure—and a positive impact on sports generally in the UK. However, we also want to ensure that expenditure incurred on the Olympics will give us the promised payback in terms of regeneration, tourism and economic legacy. It is also crucial for the overall success of the Games that they are delivered on budget, and we want to ensure that that benefit for London is not outweighed by detriment for the rest of the country. The recently reported PwC study was positive about the potential for London and the rest of the country, but only if the Government make the right interventions.
	A number of provisions in the Bill give rise to issues around general arrangements being made for the Olympics. First, there is the council tax bill for Londoners. Although the Government state, in the bid documentation, that they are the ultimate guarantor of the cost of the Games, it is far from clear how that operates. Indeed, it appears that Londoners are the real guarantors since, despite the best efforts of my honourable friend Don Foster and the Conservative Front Bench in the other place, there is no cap on council tax for Londoners in the Bill. That is no theoretical issue; the Observer reported on 20 November that the projected costs have surged because original projections allowed for inflation at 3 per cent, yet inflation in the construction sector is now over 7 per cent per annum. It appears that KPMG has been appointed to re-appraise the costs. Can the Minister comment on that? What is its remit and when is it expected to report?
	The Mayor himself seems to have started with an original calculation for the Olympics precept of £20 per head, per year, for 10 to 12 years—the walnut whip, as he described it. The expected bill seems in fact to be over £40 per year for a great many households above band D—and that is on current costs alone. The Observer article quotes an additional possible cost of an extra £1,000 per household over the period. Is that scaremongering, or a reasonable supposition? Can the Minister comment on the true figure?
	We have seen the concern of the Secretary of State over the increased estimated cost for the London aquatic centre, so this cannot just be an illusion; it is a real issue. It is not right that Londoners should have to foot all the additional costs. Will the Government undertake to limit the liability of the London council tax payer?
	Secondly, there is the issue of lottery funding. As part of the funding package, Camelot has been asked by the DCMS to raise some £750 million from games through the national lottery to support the Olympics between now and 2012, with a further £410 million to come from existing good causes from January 2009 and £340 million from sports lottery distributors for elite sport and associated sports infrastructure investment. The "go for gold" scratchcard has already raised several million pounds, but I am concerned about a major diversion of money from other causes. The Big Lottery Fund, which distributes lottery money, has predicted that grants may be reduced by some £68 million over the next four years, as lottery players switch to the games that support the Olympics. An impact assessment, which was published some two years ago, suggested that the cannibalisation rate from existing good causes could be some 59 per cent—that is, £445 million—over the period to 2012, which equates to some £64 million per annum, which is a fairly similar figure. The Government expect that non-Olympic good causes will receive up to 10 per cent less in lottery income over the period from 2005 to 2013.
	Action should therefore be taken to limit the impact of the Olympic lottery. Camelot has called for the introduction of a gross profits tax regime, whereby tax is paid after rather than before prizes have been paid to players, which would allow Camelot to increase prize payouts on selected lottery products, thereby stimulating sales growth. A PricewaterhouseCoopers report estimated that the annual opportunity cost of delaying a migration from lottery duty to a GPT regime equates to lost revenues of some £50 million to good causes, and £15 million to the Exchequer. Clearly, GPT would help Camelot to maximise revenues, both for the Olympics and other good causes. The Treasury acknowledges that the economic case for change has been made; the deregulated gambling and gaming sectors have already made that transition. Yet in the pre-Budget announcement before Christmas, the Government set their face against any change. Therefore, what are the Government doing to ensure that the impact of the Olympic lottery is minimised? Why are they not implementing a GPT regime?
	We then come to the whole issue of advertising. The rights of official sponsors of the Olympics must be clearly given due protection, and the Olympics brand should, of course, be fully protected from unauthorised exploitation—and, indeed, we are obliged to do that by the host city contract with the IOC. However, the Bill, and in particularly Schedule 4, contains some disproportionately restrictive clauses, as the noble Lord, Lord Glentoran, pointed out, which are beyond what is laid down in the IOC technical manual or the host city contract.
	I have compared the legislation used for the Sydney Olympics and, by comparison, the London Olympic association right runs far too wide. The Sydney legislation ties the list of words to the use of the word Olympic, or similar; in addition, it is clear that there must be commercial use that is designed to give a misleading impression of sponsorship. As presently drafted, the legitimate tourist trade—hotels, travel agents and so on—will be penalised for trying to encourage guests to come to London during the Olympics, when we should be seeking, on the contrary, to encourage their involvement and support.
	I am particularly alarmed by the automatic presumption of guilt which is contained in the Bill; there is no justification in this instance for reversing the normal presumption of innocence used in our courts, and that is not contained in the Sydney legislation. The IOC did not require of the UK Government a reverse burden of proof to be included in the implementing legislation; that is unnecessary gold-plating, and it is not enough simply to say that the presumption is relatively light—it is not. However, I welcome LOCOG's recent assurance that it will produce guidelines for advertisers about what in practice could lead to prosecution for breach of the right. But many questions need answering on that front: who will be consulted in drafting such guidelines, and what arrangements will there be for copy clearance?
	There are other problems with Schedule 4. There is the whole issue of the exemption for publishers and broadcasters contained in paragraph 8(a), when the use of an association is,
	"a necessary incident of publishing or broadcasting a report of a sporting or other event forming part of the London Olympics".
	"Necessary" suggests a high test for editors to comply with. How would this be enforced by LOCOG? Surely it is not for LOCOG to interfere with editorial freedom of expression by policing what falls to be considered a "necessary" incident or not. I believe this should be replaced by a more editorial-friendly test, such as the one tabled by my honourable friend, Don Foster, in the other place, that the London Olympics association right is not infringed by the use of a representation in any editorial usage, and so on. This would also ensure that websites were covered.
	Then there is the issue, referred to by the noble Lord, Lord Glentoran, of when the association right is due to come into effect. The Sydney legislation provided for this to come into effect four years before the Olympics. This Bill introduces restrictions immediately on the passage of the Bill—that is, six and a half years beforehand. Advertisements take a number of months in the planning and execution, during which time significant amounts of money are spent. The immediate introduction of the London Olympics association right could mean that an advertiser would be guilty of an offence.
	The Government have admitted that it is unlikely that there will be many infringing advertisements in the period after Royal Assent so far ahead of the Games, yet they say that LOCOG, unlike any previous organising committee, needs to protect its right during this period. In fact, legislation already exists to enable LOCOG to prevent false association with the Games, including the Olympic Symbol etc. (Protection) Act, copyright and trademark law, the law of passing off, and the misleading advertisements regulations. Other organising bodies, for the Turin, Beijing and Vancouver Games, have met or exceeded their marketing revenue budgets without introducing similar legislation, and the IOC has reported that it has already signed up six out of a potential 10 multinational sponsors for the Games. So why should there be a problem in getting sponsors? The Government have said that a light-touch approach will be taken, but advertisers are already receiving threatening letters. Clearly the Government should delay implementation of Schedule 4 until 1 January 2008.
	Then there is the issue of the Secretary of State's power to change the words, which are the subject of a London Olympic association right. At the very least we will seek changes in Committee that will make statutory the Government's assurances that they will consult the advertising industry before making changes. It is not good enough simply to rely on the fact that the changes are required to be made by affirmative order. Furthermore, what assurance can the Minister give that any changes would not be applied retrospectively? Campaigns already in production, or that have been approved by the BACC, should not have to be altered. The new rules should of course only apply to new campaigns not yet in production.
	It is crucial that, in achieving delivery, there are good communications between the various bodies set up or involved in delivery of the Games, and proper lines of accountability. In Committee, we will be probing why certain bodies are not represented on the Olympics board or will not be included in the list of consultees for the Olympic transport plan, and so on—for example, the members of the London co-ordination working group. There are a number of issues there that I will not go into in great detail. My noble friend Lord Addington will be dealing with many of the disability issues that arise in the Bill and the arrangements for them.
	I shall talk briefly about the tourism potential of the 2012 Olympics. It is enormous. The benefits are estimated at some £2 billion to the UK visitor economy. Some 500,000 additional visitors are expected in 2012, and an increase in the number of international business events is also anticipated. We hope that the Games will prove a long-term boost to tourism. The London Olympics represent the opportunity of a generation for the tourism industry. The hopeful benefits are by no means a given, however. What are the Government doing to ensure that the required leadership resources and pre-planning are in place to create the Olympics legacy for tourism? I would like to hear from the Minister that there will be sufficient funding for this task. We appear to have no commitment from the Government to invest more in tourism in the run-up to the Games. My noble friend Lady Hamwee will be raising a number of transport concerns, and I leave these in her far more expert hands.
	Finally, there is of course the question of support for British athletes. Mr Caborn and the Secretary of State say that everything will be alright on the night, but that is not the message coming through from the British sporting community. What assurances can the Minister give about the funding of athletes?
	I confirm that we on these Benches are extremely enthusiastic about the Olympics. We want to see this Bill go through quickly and I hope that the Government will make the few changes that are necessary to make it fully satisfactory. I look forward to hearing the Minister's winding-up speech.

Baroness Valentine: My Lords, it is an extraordinary and unexpected privilege to find myself in your Lordships' House. I have been made to feel most welcome and look forward to becoming—dare I say?—one of the younger members of the team. And team spirit is what we need for the Olympics. It is what delivered us the bid and will deliver the best Games yet.
	But before leaving the starting blocks, I would like to express my gratitude to the noble Lord, Lord Sheppard of Didgemere, who, as president of the business organisation London First, provides me and my colleagues with wise, prompt and good humoured advice. As chief executive of London First, I am a huge supporter of the London Olympic and Paralympic Games. We have a real chance in the United Kingdom to make these the best Games ever held. But more than that, we have the opportunity to make a positive impact on the capital, and the rest of the UK, by securing a lasting Olympic dividend.
	My commitment to athletics stems from my school days when I was once long-jump champion for London. I well remember that surge of energy before rushing off down the track in a bid to do better than all those who had come before. The UK is in that position now. The bid team has got us off to a flying start, and has handed over the baton smoothly to the London Organising Committee of the Olympic Games, which has put the team in a strong position to create an Olympics of which to be proud. Recently the International Olympic Committee visited London and felt we were some two years ahead of where previous host cities had been at a similar stage. So we have started well.
	The preparatory work over the coming months must pave the way not just for a superb Olympic event but for a permanent change to the spirit, physical fabric and economic structure of east London. This is what I referred to a moment ago as the Olympic dividend. And, as I learnt from my time in corporate finance at Barings and BOC, as well as making good investments you need to work hard to maximise their potential.
	The region in which the Olympics are to take place includes some of the most deprived councils in England. It is host to a young, diverse, socially and economically disadvantaged population whose prospects could be transformed as a result of these games taking place on their doorstep. There will be more jobs—recent estimates suggest some 38,000—more homes and better transport, resulting in a more healthy and prosperous population.
	We must all support the Olympic Development Authority in creating the infrastructure for these Games. I am delighted that it is to be business-led and the recent appointments have been welcomed by the business community. It needs to be allowed to get on with doing the job without day-to-day interference; and to achieve that requires clear political direction—someone or something that plainly speaks on behalf of all arms of government.
	But the Olympic dividend requires more than just the Olympic Development Authority. Government, the mayor and business will continue after the ODA has completed its task; and they share the responsibility of providing opportunities for the people of east London. The plethora of well intentioned initiatives to provide skills training and education enhancement arising from the Olympics must be effectively co-ordinated so that the people to whom these are directed genuinely benefit.
	In the late 1980s I set up a regeneration partnership in Blackburn, Lancashire, working with local businesses and the Asian community there, which taught me the importance of working with the people you are trying to help, to ensure that programmes intended for their benefit actually address their needs. The current review of the Mayor's powers, including skills leadership, provides the opportunity to debate how best we collectively deliver for east Londoners. It is vital that business plays its full part in any structure in informing the training and education, in providing pragmatic leadership and, ultimately, employing the individuals.
	The speed at which the Bill has progressed and the decisions that have already been taken to drive forward transport projects, such as the East London Line extension, with its innovative commitment to employing local labour, and the completion of the northern ticketing hall at King's Cross, are impressive. I would like, in particular, to recognise the way in which the Olympic boroughs have come together to resolve highly complex planning issues. I understand that they intend to continue this level of co-operation throughout the run-up to the Games.
	Lastly, as a former National Lottery Commissioner, I am pleased to say that the National Lottery was so confident that we would win that Olympic scratchcards were printed and ready to distribute on the day of the decision. To date, more than £3 million has been raised by the National Lottery. This combination of belief and preparation should characterise our delivery of the 2012 Games. It is the combination that generates the surge of energy required to excel and surpass all Olympiads that have gone before.

Lord Pendry: My Lords, it is a great pleasure to follow the maiden speech of the young noble Baroness, Lady Valentine. I am sure this House will recognise that she has spoken with great knowledge about the importance of the Games and how they will affect London. She clearly has first-class qualifications to speak in this debate with her background in both the Central London Partnership and, indeed, London First. I am sure that the noble Lord, Lord Coe, and his team will take note of what she has said tonight and that they will benefit from her wise words, as I am sure we all will in future debates.
	Before embarking on my speech, I want to add my words to the tributes that have already been paid to the late Lord Stratford, who died last week. I had known him for many years in the other place, and his love of sport and animal welfare were legend. Of course, for a brief period he was Minister for Sport. It is somewhat ironic that I was at Stamford Bridge on Saturday at his beloved Chelsea, where I was hoping to see him, when the dreadful news came through of his stroke in Florida. Lord Stratford, or Tony Banks as he was better known, came to this House with a reputation for being with my noble friend Lord Snape the wittiest pair to come from the other place in many a long year. He would, I am sure, have made an inspiring speech today in the debate, which, as he told me before the Recess, as he did the Minister, he was eagerly awaiting, especially as the 2012 Olympics would have done much in the area of Stratford. I simply repeat what others have said: he will be greatly missed.
	We are privileged indeed to have the opportunity to debate this important piece of legislation. Were it not for the heroic work of the London 2012 bid team, to whom I pay tribute, the legislation would not have seen the light of day. We all recognise the great efforts of the noble Lord, Lord Coe, on behalf of the country to ensure that this most prestigious of events will be staged in the UK again. I certainly congratulate him, as others have done, on the Sports Personality award that he won and, since then, on the honour that he received in the New Year Honours List as well. I am sure that there are many more accolades to come. However, perhaps the best award that he could hope to receive is a London Olympics, which is every bit as magical as the proposals which won over the IOC delegates in July.
	As noble Lords will be aware, I chair the All-Party Sports Group, and we are of course a cross-party group. As I have said before, in my view, many issues in sport are best addressed across the parties, and this bid was a good example of all sides pulling together. We must continue to do so to ensure that this country delivers an Olympics of which we can all be proud.
	We will certainly have the world-class venues to accommodate the Games. I have spoken previously in this Chamber to exalt the virtues of these venues, including Wembley—when it is finally finished—Wimbledon, Lord's, the Dome and the ExCel Centre, and we can add to those the Olympic Park Stadium and others. Therefore, we will be in a position not only to deliver a superb Olympics but also to regenerate east London and leave a legacy of quality facilities for our future athletes in years to come.
	I will now touch on some specific issues relating to this Bill, perhaps returning to them in Committee. The first is that of betting on the Olympics, especially when the games are staged in London. The IOC is of course concerned to protect the Games from any risk to their integrity from betting. I raised this issue in March when the Gambling Bill was passing through this place and sought to table an amendment which would have given sport more of a chance to control the betting on it. At that time I received a letter from Hein Verbruggen, who was then the acting president of the General Association of International Sports Federations. He said:
	"The impact of increasing betting activity is a very important issue to my organisation and to sport in general. I would like to express my support for your amendment and for your efforts to ensure that sport is able to protect its rights and means to ensure the integrity of sporting events".
	I understand that the IOC has required, in its agreement with the London Organising Committee of the Olympic Games, that all steps will be taken to control betting on the Olympic Games. Surely the Government—who have committed to support the commitments made by the London Organising Committee of the Olympic Games by introducing legislation—should address this issue in the Bill. How has this been taken forward? Is this issue to be addressed in the Bill itself? Will any betting business looking to offer a bet on the London Games have to enter into an agreement with LOCOG under the Olympic Association right? This would seem to be the right approach. I would be grateful if the Minister could write to me on this issue, and perhaps place a copy of the commitment that has been made to the IOC in the Library.
	Clause 31 proposes measures to tackle the sale of tickets, which has been referred to already, for any London Olympics event by anyone other than the officially authorised vendor. This measure is specifically required by the IOC and formed part of our contract when we won the bid. The proposals, which the Minister has already referred to, deal with what is commonly known as ticket touting. The proposals are welcome and cover a whole range of areas exploited by touts including the sale of tickets through Internet sites such as eBay. Your Lordships may not be aware that this is an issue which has long troubled the sporting world. It is a growing problem which is spreading to other ticketed events such as concerts, leading to ordinary consumers being forced to pay extraordinary amounts for their tickets. This has a very negative impact as it limits access to sporting events by younger people and sports fans who do not have deep pockets. The Olympics will inspire a generation to take part and watch sport, but we must ensure that they can actually afford to go to events.
	Touting is an activity which frequently operates outside the law, contravening rules and regulations set down by event organisers and public authorities. Consumer protection regulations are ignored and at times tickets are often stolen, forged or mis-sold. It also impacts on public finances, with no VAT or corporation tax being paid and additional costs as a result of increased public order offence levels outside venues.
	Your Lordships will remember that ticket touting was a significant concern for football and a cause of football hooliganism in the 1970s and 1980s. I supported the then Conservative government when they introduced a law to deal with touting in football and took a further step in making a commitment to tackle touting across sport as part of our 1997 manifesto for sports, Labour's Sporting Nation. The Government have yet to deliver on this pledge. As things stand, we will be left with the curious situation in which it will be illegal for ticket touting to take place for the Olympic archery at Lord's, but not for Ashes cricket at the same venue. I am aware that the Secretary of State has engaged with a number of event organisers and sports governing bodies, such as the ECB, the RFU and the LTA, to assess this problem. I was pleased that the Minister said that the Government were looking at the issue beyond the Olympics.
	Finally, I shall touch briefly on concerns, which remain despite the degree of assurance from the Government in the other place, about the extent to which the Bill will encroach on advertising and marketing around the period of the 2012 Games. I understand and agree with the need to protect the Olympic symbols. Indeed, I was instrumental in bringing in the Olympic Symbol etc. (Protection) Act some years ago. However, with copyright and trademark law, there is arguably enough legislation in place already to prevent the misuse of Olympic symbols and a belief among advertisers that any new layer of regulation would go beyond what is necessary. We must take care that these protections are set in place in a manner which does not encroach on legitimate activity of businesses in London and the UK, notably the introduction of a new intellectual property right. The London Olympics Association has said that it is necessary to keep within the spirit of the IOC agreement, and of course it is, but there is also alarm at the speed with which the Government intend to introduce these new measures.
	It is frightening that I sometimes have to agree with my colleagues on the other side of the House—the noble Lord, Lord Glentoran, in particular—but I certainly do on this issue. I applaud the principles that lie behind these aspects of the Bill. They seek to protect and therefore to help recruit the official sponsors who will provide the financial commitment that will be so important to the success of London's Games. However, it is important to recognise that the summer Games in Beijing in 2008, as well as the winter events that are scheduled to take place in Turin and Vancouver in 2006 and 2010 respectively, have each exceeded their targets for generating marketing income without the additional measures that the Government are proposing. So I welcome, as I am sure would the noble Lord, Lord Clement-Jones, a government commitment to meet representatives of the advertising sector to review these issues. I hope that they will be addressed at a later stage in Committee.

Lord Higgins: My Lords, I join the noble Lord, Lord Pendry, in congratulating the noble Baroness, Lady Valentine, on her maiden speech. One of the advantages of having an appointed as well as an elected Chamber in Parliament is that we can get expertise such as hers to play an important role in our business. I am particularly glad that this debate is taking place this evening since, after the delay before Christmas, I wondered whether the more stringent rule of "two false starts and you're out" now applied.
	I am absolutely delighted that the London bid for the Olympics in 2012 was successful. I am particularly glad that the effort of the noble Lord, Lord Coe, in this respect was recognised, among other ways, in the New Year honours list. The team put in a quite remarkable sprint towards the end, and I hope that the country, London and sporting community will gain from the fact that we are to hold the Olympics in 2012 in London.
	It is rather worrying in a way that it is well over half a century since I marched round in the opening ceremony of the 1948 Olympics at Wembley, together, I believe, with the noble Baroness, Lady Billingham. As was shown by a recent film which appeared on television entitled "A Very British Olympics", those Games were a great success and conducted under very difficult conditions as the Minister pointed out. Food was still rationed. To avoid complaints, the American team received unlimited supplies of steak and probably consumed more in a week than the annual meat ration at the time. I was doing my national service in the Air Force and I got an extra pint of milk a week—the main advantage of which was that it enabled me to go to the front of the queue in the cookhouse.
	We have a very important occasion in front of us, and I join my noble friend and all noble Lords who have spoken in supporting the Bill. None the less, we will need to scrutinise it carefully. The Olympic Games are now an enormous event—in some ways perhaps too large. Despite the noble Baroness who just waved to me across the Chamber, I am not at all sure that it is a good idea to have tennis included. I have a strong feeling that if one were to inquire whether a tennis player would rather win Wimbledon or Olympic tennis, the choice would be in favour of Wimbledon.
	The scale of the Games is enormous and attention has rightly been drawn to the question of costs. We need to scrutinise them very carefully. No doubt we will wish to do so in Committee. Concern has also been expressed about advertising, and I have also received representations about the environmental effect on some parts of east London. The Delegated Powers and Regulatory Reform Committee has raised a question that had not been raised so far and the Minister may like to respond to it. It points out that Clause 20(4) disapplies the hybrid instrument procedures from the regulations, and the House may wish to question why, in the light of disapplication, organisations representing those affected by the regulations have not been included among those required to be consulted on their content. It seems appropriate that they are consulted in the preparation of such orders.
	Following the tragedy in Munich and subsequent terrorist attacks, I share the concern of my noble friend that security seems to have been dealt with very briefly. There is no more than a passing mention in the Bill. Perhaps we should consider to what extent any special provisions may be necessary.
	In my remaining remarks I shall concentrate on transport. It seemed to me that one of the main reasons why we might not win the bid was that London transport is so bad; and that the main case for getting transport in London improved was to win the Olympic bid. We can already see some improvements coming through as a result of the bid, in particular in the Jubilee line. I am more doubtful about the Docklands Light Railway. The carriages are very short and there are far too many stops. On the other hand it is probably difficult to get a train to go straight from the City to the Olympic venue if normal traffic is operating at the same time.
	Another thing that worries me is that we will need to have contingency plans. A few weeks ago, a bus caught fire in a tunnel in Docklands on a Sunday. It was, I think, more than a week before the tunnel was put right and meanwhile traffic in south London was in chaos. It took me more than two hours to go seven miles from Blackheath—and then I had to pay the congestion charge at the end of it. Had that minor accident—just one bus catching fire in the tunnel—happened in the middle of the Olympics, it would have totally disrupted the transport arrangements. That is something that we will need to cater for in our preparations.
	The other thing that worries me is the role of the Mayor and the relationship of his role to the delivery authority and the Secretary of State. I recall that when the IOC was initially visiting London to look at the arrangements that might be made here, action by the Mayor jeopardised or was in danger of jeopardising the case we were trying to put forward. As far as transport is concerned, other than reducing two-lane roads in London to single lanes and the constant introduction of more traffic lights and bendy buses—which themselves have had problems—it seems to me that he is not the ideal person, to put it no more strongly than that, to be responsible for improving transport in the context of the Olympic Games. So I think that we will need to look in Committee at the extent to which the Mayor has powers. He is inevitably involved in the contract, but at the same time he appears to have a veto—and a veto as far as the Secretary of State is concerned—with regard to some of the issues that are obviously important if the matters with which we are concerned in the Bill are to be carried through successfully.
	An event such as an Olympics in any particular country has a tremendous influence on raising enthusiasm for sports generally. Fortunately we have got away from the politically correct view some years ago that competitive sport was a bad and dangerous thing. But there is a problem as a result of the professionalism now. Alas, the old amateur concept of the Olympics has long since disappeared and we concentrate more and more on elite athletes. The noble Lord, Lord Pendry, referred to the finance for athletes' training. There is now a gap, certainly as far as athletics is concerned, between the progress from school to club and then to international competition. In fact, the standard, allowing for the improvement in tracks and so on, is not greatly better at club level than it used to be 50 years ago. At times they are somewhat better but they are not enormously better at that level. People therefore have to make a huge jump from being a good club athlete to joining the international elite. That is something we will need to consider carefully if we are, as I hope we will, not only stage a very successful Olympic Games but also as a country produce athletes who will have a good result competing in those games.

Lord Addington: My Lords, my first pleasant duty from these Benches is to congratulate the noble Baroness, Lady Valentine, on a good start. The only thing about a good start is that you have got to keep it up. I have been one the younger Members of this House for nearly 20 years. You can enjoy being that for a while here.
	I am glad we are discussing this Bill. It was a hark back to teenage years when it was announced on the TV and I found myself jumping up and down—and thinking that this was rather an undignified way to behave. It was a wonderful moment. We have an opportunity to go on and create something which will leave a wonderful imprint on the mind and the imagination of people for a long period in the future. Yet one of the reasons that we won it is rather more mundane: it gave us the chance to focus on and regenerate a part of our major capital city that would probably not have happened otherwise. One of the major groups involved includes those who provide the recruitment bases for athletes for the Paralympic Games. It is important that it is the London Olympic Games and Paralympic Games.
	The noble Lord, Lord Davies, has been warmed up to this in the experience of the last DDA Bill and the hours of fun we had on that. I hope that he will take in that we must concentrate on getting the disability access, the planning and the structure right. We will do that by getting the expertise in early, making sure that we are not having to chase around afterwards adapting buildings, structures and transport links after they are half-completed. What is in place in the structure and recruitment of the expertise to get that done? The thing about disability access and structure is that there is no one disability. It is something of a truism and I have said it far too often in this Chamber, but everyone thinks of a wheelchair. Then people have a little struggle and think, "Oh, what about the blind and people with visual impairment?". Then they work back over a great deal of time bumping into problems, saying, "That group as well? Oh, yes". In the realisation of this and the opportunity of the commission we had an advisory panel to tell people about the different types of disability, how they can act, what is needed and what seems to bring them in. I hope that the Government will be able to tell us and show us in fairly short order where the structures are for getting those bits right and from where the expertise is going to come. If they do, they stand an incredibly improved chance of ensuring that they will not be chasing their tail and making corrections later on.
	People may think that this is not a big part of the project, but the Olympic village, for example, will presumably be the same village for the Paralympics. That will be a huge amount of accessible housing in the middle of London that can be used afterwards for anyone. It will be housing which, if we get this right, will already be available for the vast majority of people with disabilities to use—independent living projects. I suggest that that is a massive bonus. We will have improved access on all the transport links. That is a massive bonus.
	We also know from experience that that does not just help the disabled. It must be getting on for 15 years ago that I first pointed out that a ramp does not just help someone in a wheelchair; it helps a mother with a pram—that was the first example that I used. Now, everyone who has a suitcase seems to have one on wheels; it will help anyway with a heavy suitcase. I could carry on. That will help everyone.
	The noble Lord, Lord Davies, and I remember the issues well. Let us consider signing on trains and announcement systems. We have had hours of fun on that before. Do not tell me that having announcements made clearly and signs put up clearly will not help tourists. That will help everyone but that makes it possible for other sections of society to use. From where are the Government recruiting the expertise to allow that to happen? If the Minister can give me an answer today, or at least give me assurances that he will give them to me before we table amendments for Committee, I assure him that I shall not bother him further—or, at least, that I shall bother him less than I otherwise would.
	Let us face it, my attitude towards the Games is that they are a wonderful thing. If the Government are getting it right, let us go on with it and back them. I do not want to waste my time or anyone else's fighting battles that will be won. If we get the assurances, I shall not table more amendments just to go through the motions and the ritual dance. The noble Lord, Lord Pendry, put it clearly: this has enjoyed a degree of cross-party co-operation from which many other fields would benefit, but from which we often chicken out at the last minute. This could be an area on which we agree. Disability legislation is another field where a degree of cross-party consensus can be achieved, with or without the ritual dance.
	I finish by saying: tell us where the information, the structure and the planning is. Tell us who you have contacted and what is the consultation and then we can leave it alone. If you cannot, we must return to it.

Baroness Billingham: My Lords, I add my warmest congratulations to the noble Baroness, Lady Valentine, on an absolutely outstanding maiden speech. I am sure that she will already have gathered that we regularly have debates on sport in this House. The people she has heard today are an illustration of the distinguished people we have here. We have Olympians; we have people who have been involved in sport for many years; we have powerful voices in sport. In fact, I like to think that this is a really top team; an elite squad in itself. The noble Baroness will be very much welcomed to join us in these regular debates in this House and I look forward to her contributions in the future.
	Let us look back to 6 July. As has already been said, it was a moment that is frozen in time. It was a seemingly endless moment between the opening of the envelope and the magical announcement, "And the chosen city is—London". How we cheered, how we leapt—some higher than others—and how we wiped away a tear or two. The nation celebrated all the sweeter for it being that little bit unexpected. Tonight, we take on in this House the responsibility of ensuring that those magical moments of aspiration are converted into solid strategies for realising them.
	The Bill before us today is the blueprint. It sets out the structure for managing the key facets of the Games, the management planning and the financial investment that is essential if we are to be successful. The background to the Bill indicates the Government's determination to create what has been described as "the greatest stage ever constructed for the greatest show on Earth". Drawing on expertise worldwide, the DCMS has formulated the Bill after the closest possible co-operation with key players. They have already been mentioned: the British Olympic Association, London 2012 Limited and the Greater London Authority. Those major agencies have brought to the table a huge pool of experience and expertise and the resultant Bill is, in my view, due in no small part to their professionalism and commitment.
	But whilst the British people have a warm heart in favour of staging the Olympics here in the UK after, as we have already been reminded, so many years, they also have a cold eye on delivery and cost—and quite right too. The Games have to be properly organised; they must be delivered on time—and, in my view, well before time in order to detect any flaws—and costs have to be not only controlled but realistic. Bearing all that in mind, we welcome the role of the Olympic Delivery Agency, the ODA, as set out in the Bill. It is charged with the responsibility of managing our approach to the Games.
	It has a huge challenge before it, balancing the long-term objective against the short-term delivery vehicle. At the same time it has to take, in that vehicle, public opinion, media challenges and national confidence. All those challenges have to be faced across the whole of the UK, not just in London where the Games will be principally staged.
	We in this House do not have constituencies to promote as Members of the other place clearly have. They quite rightly seek to ensure that where possible and reasonable their neck of the woods receives a fair share of the opportunity afforded by the Games. That fair share may be prior to the Games in training facilities, during the Games with specific sports being hosted in their area, and, equally important to their region, benefiting from the legacy of the Games.
	However, we in this House have strong ties and we should not be reluctant to make the case for dispersal of the opportunity that the Games can afford. I have to say that I unblushingly suggest that Corby be considered as a wholly appropriate venue for any stages of the Games that are set out. Yes, I confirm that I chair the URC, Catalyst Corby, and therefore declare an interest. That experience of chairing the first URC to be designated, some five years ago, makes me all the more appreciative of the extraordinary challenges that lie ahead of the ODA. It will require enormous attention to detail and the most sensitive approach to put the blueprint into effect. We are not just dealing with pieces of land; we are dealing with people's lives—people who, at present, may feel threatened, and towards whom special care should be shown. I would welcome the Minister's response to criticism from some quarters that existing businesses and some local residents have not had a proper hearing or compensation. How does the Bill help in these matters?
	Over the past months I have spoken at conferences looking at the opportunities for the construction industry and property developers, which were already flowing from the Olympic project. I have also spoken to local authorities closely involved with the project, who see the enormous potential for their areas. Several issues have emerged from these conferences, which I hope the Minister will be able to address, and perhaps reassure us. The construction industry has expressed concern at the lack of skilled and semi-skilled workers, who will be needed to build the facilities required. What is being done to increase the pool of such a workforce?
	There are existing schemes, with examples all over the country, including apprenticeships, technical training in further education and company-based training schemes. The long-term unemployed are being targeted to encourage them to take up such opportunities, and training in young offender institutions and prisons is also under way. These are excellent projects, but what are the Government doing to support and encourage more? Are we providing enough advertisement of skilled and semi-skilled opportunities in all EU member states? Are the regional development agencies fully engaged? I know that the East Midlands Development Agency is doing pioneering work. Their support of Catalyst Corby has been outstanding; are we drawing fully on their expertise?
	What is the timetable for accountability? Will we be given regular briefings and, perhaps, brought into debates when problems—and they will arise—become apparent? Already the chattering classes, in Hampstead at least, are complaining about the lack of car parking facilities in the overall scheme at the Olympic venues. Perhaps the Minister could take this opportunity to show us how public transport will be transformed to more than meet the requirements.
	Important though these individual issues are, the Bill gives us enormous confidence that London will be a stunning success in all respects, and that the Games will indeed be a triumph. I know I share with the whole House our best wishes for those who lead this project, not least the noble Lords, Lord Coe and Lord Moynihan, and the leaders already appointed to take the project forward. Our Secretary of State at the DCMS and the Sports Minister have indeed been outstanding.
	Seven years seems a long way ahead; not a bit of it. I will be among the first to buy my tickets for many events and I confidently expect my grandsons, who by then will be 14, 12 and 10, to be with me. On behalf of sport lovers everywhere, and gallivanting grannies in particular, may I wish the Bill a safe passage through the House? I look forward with enormous excitement to witnessing the Olympic Games of 2012. May I finish by addressing the point raised by Lord Glentoran: the possibility of Wimbledon being hijacked? I have a far more pleasurable vision in my head: that of Andy Murray standing on the rostrum with the gold medal at his lips, in the Centre Court. I can hardly wait.

Lord Brooke of Sutton Mandeville: My Lords, it is a pleasure to follow the noble Baroness, Lady Billingham, whose sporting achievements are far greater than my own. The only claim I can make, even marginally tangential to hers, in the particular game at which she excelled, is that I am unbeaten abroad at real tennis. However, I have to confess that although I have played real tennis abroad, I also once protected my unbeaten record by declining to play the then world champion after I had been his guest at lunch in Philadelphia when he discovered I could play it and offered me an immediate match.
	It was also a great pleasure to be present for the highly apposite and beautifully delivered maiden speech of the noble Baroness, Lady Valentine. I am already looking forward to her next one. I congratulate Her Majesty's Government and their allies who are represented in the team which will deliver the Games on having secured them. I have known my noble friend Lord Coe since my eldest son was, two decades ago, one of his colleagues in the Haringey AC, and I have the utmost confidence in what he and his colleagues will achieve.
	The Bill is a timeous next stage. I recognise that it is required to provide the legislative cover for the contract which Her Majesty's Government have signed with the IOC. I shall comment on only two aspects, which I shall take alphabetically—advertising and biodiversity. They were both covered earlier in the debate. On the former, I speak as a member of the Delegated Powers and Regulatory Reform Committee of your Lordships' House. Your Lordships will know that we drew attention to the significant powers on advertising and supplemental regulations in Clauses 19 and 20. We found those in Clause 19 acceptable, given the special considerations, but we prompted the question—successfully, in the case of my noble friend Lord Higgins—in relation to Clause 20 about why, in disapplying the hybrid principle in Clause 20(4), organisations representative of those affected by the regulations had not been included among those required to be consulted on their content. Only those responsible for planning in the relevant places, the Olympic Delivery Authority and the London Organising Committee, were to be consulted on regulations that the Secretary of State will bring forward under Clause 19.
	If the Secretary of State can change the list of words in the Act by affirmative resolution at any time in the next six and a half years, advertisers are left with little certainty or protection. A television commercial can take much more time to produce than is required for an affirmative order to go through both Houses, and no consultation will have been vouchsafed them in advance. The direct implementation of Schedule 4 restrictions upon Royal Assent, as the noble Lord, Lord Clement-Jones, said, has the same effect. It is worth asking the Minister what is different about this Bill, six years before the Games, from the Communications Act and the Gambling Act, which both afforded comparative consultation to the advertising industry.
	Other noble Lords have alluded to the standard presumption of innocence under English law being reversed into presuming advertisers guilty of infringing the London Olympics association right unless and until they can demonstrate they are not associating with the Games. As the noble Lord, Lord Clement-Jones, said, the IOC does not require this. Perhaps it paid us the compliment of believing it impossible that this country, of all countries, would reverse the burden of proof.
	The debate about the vocabulary that will not be permitted in advertising by Schedule 4 is more for Committee, but it may be the first time in English law that the word "summer", if used in particular connotations, may carry the mark of Cain. I agree that we are obsessive about the weather, but this looks at first a season too far. Under the Act, the term "gold-plating" may even become illegal, but that makes it the more important to make the point now.
	We shall no doubt also debate in Committee why existing powers are inadequate to meet the Government's needs, and some of them have been quoted, but the scent of retrospection currently lies unsweetly in the air.
	That is a good climatic note on which to change gear to biodiversity. I declare an interest as a vice-president of the London Wildlife Trust, which covers the area of the 32 boroughs, the Corporation of London and the Greater London Authority. The bid document and its logic was well received for its references to sustainability. The trust of which I am an honorary officer supported the prominence placed on biodiversity within the regeneration process and Defra's promotion of "the sustainable elements of the bid".
	The potential opportunities in the Olympic Park development plans are considerable, but emphasis on the natural environment is not reflected in the wording of the Bill, especially in Clause 4. I foresee a lively debate on the absence of this emphasis from that clause in Committee, given that built structures, sustainable drainage, and the regeneration of the lower Lea to link wildlife sites through a network of ecologically functioning waterways offer such potential. We may be encouraged by the newly appointed ODA chief executive's decision to slow down decision-making for the Olympic Park with the eventual legacy in mind, but he too would no doubt be encouraged by better legislative cover. Additional environmental benefits could include water recycling and reduced carbon footprint, which were both highlighted issues in the London 2012 candidature file, Theme 5 Environment and Meteorology, which was submitted to the IOC.
	In the end, we look forward to our successor to the 1948 Games, made memorable then for the young, like myself, by the genius of—again alphabetically—Blankers-Koen and Zatopek. We have our chance, in the scrutiny of this Bill, to make all that more likely and even more worthy of Tony Banks' memory. As the late Damon Runyon once memorably wrote, "The race is not always to the swiftest nor the battle to the strongest, but that's the way to bet".

Lord Berkeley: My Lords, like the noble Lord, Lord Brooke, I can boast no sporting achievement whatever but I have an interest in transport. I want to see the transport arrangements for the Games work and work successfully. One of the bravest decisions that Ministers made some time ago was not to try to include Crossrail as that would have been a disaster. I believe they have achieved some excellent arrangements without Crossrail. Whether the construction of Crossrail takes place can be debated elsewhere, but the arrangements are very good and I congratulate them.
	As the noble Lord, Lord Brooke, said, not only could the phrase "gold plating" be illegal but there are one or two matters in the Bill that are, shall we say, gold-plated. I would like to cover those briefly, although not in any particular order.
	I was fascinated by the Olympic transport plan. I recall seeing some of the publicity surrounding the bid and I have this vision of the main Olympic sites in Wimbledon, Wembley and Stratford being connected by vehicle-free roads with competitors, spectators and others being whisked along, led by police outriders and lots of blue flashing lights. That is a very sexy and attractive image for those in the car behind the police outriders, but for the rest of London it could cause a few problems, even in August. Clauses 10 to 15 will require scrutiny because what is required is unclear. It is quite clear that the whole of London and the south-east will have to keep the streets clean otherwise somebody will get at them and no doubt charge them for doing the cleaning.
	I would be interested to hear from my noble friend what exactly is the Olympic route network, what is the transport plan and what exactly do they intend to do? They can block up roads and regulate traffic—they could probably do that at the moment if they chose the legislation carefully—but we have to consider residents, traders and businesses. I am sure the problem can be resolved but to me it is extremely unclear and could cause major irritation, which would be a great shame over the next six years. The powers that the Government are seeking are slightly draconian, but we shall see about that.
	I turn to the construction of the facilities, particularly at Stratford. I declare an interest as chairman of the Rail Freight Group. These days, when large projects are constructed, there is usually a stated intention to bring in as many materials as possible by rail or water, if water is available and, of course, for the Olympics we have the Thames and the River Lea. I cannot see anywhere in the documentation any commitment to using rail freight for bringing in cement, aggregates and building materials. After all, the Channel Tunnel Rail Link has been built with an enormous amount of material brought in by rail, as was the Channel Tunnel—with which I was involved—and as is Terminal 5. How many lorries would have been required to bring in all that stuff, even to somewhere like Terminal 5, which is not in the centre of London? It is unimaginable.
	I was talking to someone today who may be bidding for the supply of cement. He said, "We can bring the cement up the river in 10,000, 20,000 or 30,000 -tonne barges". Do you really want all that to be transferred to lorries or brought in from outside by lorry? My worry is that, to my knowledge—and I checked last week—the rail freight industry has not been consulted at all. If you want to bring things in by rail—I expect the same applies to the river—you have to have facilities. There are some facilities on the Stratford site. Very helpfully during the bid stage I had a discussion with the LDA, which said, "We're going to remove all those facilities at the start of the job because we need to construct a car park there—a single-storey car park at ground level. The Queen will drive through it and she does not want to get cement dust on the Royal car".
	I said, "It's possible to build multi-storey car parks these days and, anyway, you said that you were not having car parks on the site so why not leave the facility that could supply concrete by rail to help build the site?". Someone grudgingly replied that they might do and I said that they might have to build another siding somewhere else to receive other materials. They said, "There isn't anywhere else". I said, "Well we could help look", but they were not interested. I have heard that there is a certain disagreement between TfL and the Olympic Delivery Authority over this very issue. I think that it is absolutely fundamental. There should be some environmental consideration of the problems of construction. Otherwise, the communities around Stratford will get very angry. It is quite possible to solve but somebody needs to start planning now.
	I had a discussion with the LDA about rail freight going through Stratford during the Games because a large amount goes through Stratford. It will all go underneath in the depths. The LDA said, "We will have to stop it for three months", which effectively means that the ports of Felixstowe and Tilbury and other places may have to stop running rail freight containers for three months because the container might contain a bomb. I said that a passenger train could also carry a bomb and they replied that they had already decided. I said, "Have you talked to the Department for Transport security department—TRANSEC—to the Metropolitan police or MI5?". They said, "Who is TRANSEC?", which showed how good the research was. Eventually, I received letters saying that they were not going to stop trains after all. I hope that my noble friend will give me some comfort that that is still the case because it was not done in a very professional way.
	There is a nasty clause—Clause 17—which gives the Government powers to give directions to an independent rail regulator. We have had problems with this on Crossrail—rather worse problems actually which have been addressed and discussed, but it is not necessary for the Games. Everyone will work together to make sure that the passenger trains can get there and to make sure that the contractual rights that other operators have are not affected. If they are affected, they will have to be compensated.
	The Department for Transport is now in charge of letting passenger franchises. I suggest to my noble friend that he tries to set a timetable for the franchises which will be serving that part of east London and lines leading into that area. They should not start letting franchises around the time of the Olympic Games, because one finds that the senior management of the companies bidding put all their efforts into winning the next franchise and the quality of service can deteriorate pretty fast. My noble friend has six years to sort this out. It also applies to the Docklands Light Railway. Let us let them two or three years beforehand or leave it until afterwards so that everyone can concentrate on making these wonderful Games a real success. I wish them well.

Lord Borrie: My Lords, when the Secretary of State, Tessa Jowell, introduced this Bill in another place last July, she emphasised the many social benefits of the Olympic Games coming to London in 2012. She spelt out in particular the inspiration that they will provide for millions of children with dreams of sporting success, and the chance to transform one of the most deprived areas of London.
	The Government are to be congratulated on losing no time; the decision of the IOC was on 6 July, and moving the Second Reading to give effect to the Government's commitments was on 21 July. The Bill sets up the Olympic Delivery Authority, to deliver the public sector obligations of the Government, and provides the legislative framework needed to enable this country to fulfil the requirements which the IOC places on whoever is the winning host city.
	Along with the noble Baroness, Lady Thornton, I am among the last speakers in this debate before the winding up. For me, there have been two joys. One is to have heard the excellent maiden speech of the noble Baroness, Lady Valentine. The second is to have had the joy of hearing the Front Benches of both the Conservative and Liberal Democrat parties plus the noble Lord, Lord Brooke, and my noble friend Lord Pendry all criticise Schedule 4. Tucked away at the back of the Bill, it introduces some of the most extreme legislative forms of restriction on legitimate economic activity that I have ever had the misfortune to see.
	I come to the technical part. Rights, in the nature of copyright, are to be granted by the London Organising Committee conferring exclusivity on,
	"the use of any representation . . . likely to suggest to the public that there is an association between the London Olympics and",
	whoever makes that representation. Breaches can be challenged in the court by the all-powerful London Organising Committee. I declare an interest, as chairman of the Advertising Standards Authority. As such, I, along with my colleagues, am concerned to adjudicate on complaints about any advertisements in any kind of media that are misleading, offensive or irresponsible. But while I hope that noble Lords will agree such advertisements as those deserve to be condemned in the public interest, I am committed in general—as I hope noble Lords also are—to freedom of speech, including freedom of commercial expression. I want restrictions of any kind, whether inserted by Her Majesty's Government or elsewhere, to be adequately justified.
	I hope I am not being too pompous about it, but would we not all agree that advertisements are largely useful to consumer choice? Marketing freedom is certainly of the essence of competitive economic activity. There are restrictions on the marketing of goods or services other than those that I have just mentioned—the ads which are offensive or misleading, and so on—where patent rights or copyright belonging to others are adversely affected. The reason for that is perfectly good. If patentees and copyright owners had no period of time when they could exclusively use their patent rights, there would be no adequate incentive to produce the special thing which justifies intellectual endeavour being protected in that way. A monopoly—although it is a word that I do not normally like—is justified, at any rate for a limited period of time, and the current law allows that for those with patent rights and copyright.
	Schedule 4 attempts to do something similar. Perhaps the Minister will use the argument that London Olympics association rights are just like copyright, and therefore they are perfectly legitimate. Of course, I accept some part of that argument, which is that the London Organising Committee must seek fairly to find entrepreneurs who are willing to be designated and to provide money to help to run the Olympics, and that those sponsors of the Games need exclusivity, at any rate for an appropriate period of time, to justify the investment and the expense of sponsorship. However, the question that the noble Lord, Lord Glentoran, was the first to raise this evening, which was followed up by an excellent range of detailed comments from the noble Lord, Lord Clement-Jones, followed by others such as my noble friend Lord Pendry and the noble Lord, Lord Brooke, is whether the proposed period of time, from Royal Assent in a few months' time all the way until 2012, is justified.
	A period of six and a half years seems to many people to be more than enough and to be disproportionate to the legitimate needs of the business sponsors. Yet the Government in another place, when this question was raised, referred to unauthorised marketing in 2006 and 2007, before even the time of the Beijing Games, as "ambush marketing"—a phrase that suggests something most undesirable. Moreover, the normal burden of proof, as the noble Lord, Lord Glentoran, succinctly said, is reversed, so that in certain circumstances the use of words such as "Games" or "2012", together with other words that are listed in the schedule, such as "gold" or "silver" or "London"—or even "summer", as the noble Lord, Lord Brooke, pointed out—is caught. Therefore, someone who markets more or less anything as being available, such as hotel accommodation, in the summer of 2012, will be breaching the exclusivity rights laid down in the legislation.
	Other noble Lords have pointed out that even the words in Schedule 4 now are not the only words that people will have to trouble about, because they can be altered at any time by regulation, over which there may be some element of parliamentary control; but advertisers and marketers will not know in advance what they can safely use. Of course, those given association rights need to know that their rights will be protected, so that funding arrangements for the Games can be put in place. But is it not enough for them to know that their rights will be protected in what I might call the immediate lead-up, and of course during the Games, but not next year, well before even the Beijing Games in 2008? As the noble Lord, Lord Clement-Jones, pointed out, there is already protection for the London Organising Committee in existing laws; and I think the noble Lord also said that six out of the 10 top sponsors have already signed. So LOCOG seems to be having no great difficulty in obtaining multinational sponsors. The Sydney Games, to which noble Lords referred, did not need such lengthy restrictions to obtain money.
	There is something extreme and undesirable about what is in Schedule 4—most particularly if it is to come into effect at once.

Baroness Thornton: My Lords, I start by adding my congratulations to the noble Baroness, Lady Valentine, on her excellent maiden speech. Like many noble Lords, I look forward to her continuing contributions to our business. I may be the least likely Member of your Lordships' House to participate in a debate about a sporting event. From a sporting point of view, as my family and friends will testify, I am certainly the least qualified. However, I am passionate about other matters that are inextricably linked to the winning of the 2012 Olympics, about which I feel strongly enough to endure the derision of others about my woeful ignorance about matters sporting.
	I welcome the words of my noble friend the Minister about Tony Banks, Lord Stratford. Tony would surely have enlivened proceedings today by telling us a few scurrilous tales about how the bid was won. He was a dear family friend for over 20 years. We hardly got to know him in your Lordships' House before he was taken from us, and it is indeed a terrible shame.
	I need to declare several interests, as a board member of Social Enterprise London, and as chair of the Social Enterprise Coalition, the national voice for social enterprise. I have worked, and work now, for several organisations that have an interest in the Olympic Games, such as London Remade, who worked with the London organising committee for the Games to ensure that the 2012 bid was the most sustainable ever submitted, and added to that bid green procurement and zero waste. I am also associated with a community-based organisation called O-Regen, which is based in Walthamstow, and whose employment programmes and community centres are exactly what is needed to benefit local people over the next six years in preparation for the Games. Finally, I was a resident of Hackney, one of the five Olympic boroughs, for almost 20 years. I hope that at long last Hackney will get some of the infrastructure it needs as a result of the Games. Indeed, it is my association with community-based organisations and businesses, and my long association with east London, that led me to express the hope that the Olympics will belong to London, and the east of London.
	My right honourable friend the Secretary of State and her team, along with the noble Lord, Lord Coe, the Prime Minister and the Mayor of London, and indeed the young Londoners they took with them to Singapore, are a huge credit to all of us. They did a magnificent job winning the bid. Although I am not a sporty person myself, I supported the bid from the outset, and am enormously excited by the possibilities the Olympics offer, not just to London, but to the UK. Indeed, my home county, Yorkshire, was one of the first to support and then welcome the 2012 Olympics, with Terry Hodgkinson, the chairman of Yorkshire Forward, saying,
	"we will be looking to attract more athletes to train in the region and are looking forward to showing the world what we have to offer".
	I think I have even travelled home on one of the GNER 2012 trains.
	The Olympics are a huge undertaking, and I am confident we will produce a brilliant and sustainable Games. My interests lie in the legacy of the Games and the benefits to social enterprise and local businesses, communities and local people over the next six years, during the Games and thereafter. My questions about the Bill are centred on whether the proposals, structures and powers are robust enough and will enable and ensure the delivery of these benefits. This is the test I will be bringing to this Bill in its passage through your Lordships' House.
	The fact that the indices of deprivation state that, of the 354 local authorities, three of the five London Olympic boroughs are the fourth, fifth and 11th most deprived communities in the UK—and the other two are in the top 50—tells us that it will not be enough to allow either the marketplace or the default position of public procurement to rule. In other words, to revert to the comfort zone of very large developers and huge management facility companies cleaning up on the big contracts for the Games would mean that much of the real wealth would be lost to the areas that are intended to benefit from them. Part of the planning has to include a commitment to enable the boroughs and communities; schools and colleges; businesses large and small, traditional and social; and the full range of charity and voluntary organisations to play their part. We do not want an Olympics "done unto" the Lea Valley and the East End of London. We want an Olympics that draws on, builds on and invests in the Lea Valley and the East End of London.
	That will require imagination and long-term aspirational thinking to deliver regeneration to the Lea Valley, wider London and the UK. This is the challenge facing the Government, the Mayor and the ODA. Contracts are already being granted, so no time is to be lost. To illustrate my point, Greenwich Leisure operates leisure facilities in all five London Olympic boroughs, and other London boroughs. It is a social enterprise, which means that its profits are ploughed back into developing community-based sports facilities; it means that its governance is locally based and controlled and that its whole focus is on providing great sports and leisure facilities for local, often poor and diverse communities in London. Already, Greenwich Leisure has started a "kids swim free" initiative as part of its Olympics endeavour. It will provide a special Olympic card for every London school pupil. There is no doubt that Greenwich Leisure and other community-based enterprises, like O-Regen, are perfect for ensuring that the link between training and employment is kept at local level and in a long-term investment in both the five Olympic boroughs and the wider London community. Greenwich Leisure and other local businesses are worried that if the procurement regime bundles contracts together without regard to local employment and impact, in some cases they will not even get the opportunity to tender properly.
	I was somewhat though not wholly reassured by the briefing received from the Mayor of London for tonight's debate, which states that,
	"contract and supply chain opportunities for businesses large and small",
	will be addressed, and that,
	"facilities for new jobs",
	will be created. It must be the case that we need a supply of skilled people to do the necessary building. But London's colleges have already missed the boat for this academic year. We need to see the investment for the courses being put in place now, to start in September 2006. However, my understanding is that the Learning and Skills Council is cutting back on its local delivery organisations in the capital and that the delivery of a skilled workforce might already be a challenge. So I hope that the LDA, the Olympics body and the Mayor are already battering on the door of the DfES about this. Perhaps a bit of joined-up government is needed here.
	In my final remarks I wish briefly to address the issue of London's children and young people. The bid team took those wonderful youngsters with them to illustrate the youthful, modern, multiracial nature of London's bid and London 2012. Having put children and young people at the heart of the bid, surely we need to put children and young people at the heart of delivery of the games. I have to ask, looking through all the documentation so far, where are the children and young people? I hope that as well as the sustainable and environmental measures that are planned, and those against which the Games will be measured, we will also be looking for an input and a voice for London's children and young people, because this is an opportunity to bring games and sports back into the lives of London's schools and to establish for all London's children the benefits that that would represent for the long-term health of a generation. We not only need to address the needs of the youngsters who we hope will reach the excellence and expertise that allow them to participate in the games in 2012, but we need to address the needs and expectations of all London's children and young people.
	I wish the Bill well through your Lordships' House and look forward to my noble friend the Minister's response to this excellent debate.

Baroness Hamwee: My Lords, I was able to make a note saying that I know that the noble Baroness, Lady Valentine, will make an enormous contribution to the work of this House based not just on her speech today but on the evidence of our encounters over a long period. She appeared not even to need the security blanket of a set of notes. I find that not only admirable but truly astonishing. She may have noticed that the rest of us are clutching pieces of paper.
	Where each of us was at 12.47 on 6 June 2005 may be a question that we ask, and exchange anecdotes on, for some time. I declare an interest in that I am the chair of the London Assembly, which incidentally means that I wear the badge that Tony Banks once wore. Because of that, I was in the press gallery at City Hall. A radio station wanted me there for a live reaction to the announcement, whatever it was to be. When it happened, the producer back in the studio was so excited that he forgot about it. I say to my noble friend Lord Addington and to the noble Baroness, Lady Billingham, that I was undignified. I did not leap—I do not do leaping—but I did shout, somewhat to my own surprise. Like many others, I did not know until that moment quite how much I cared, nor, indeed, how patriotic I felt about the Games. Being in a position to see the Red Arrows flying over London just after the announcement rather consolidated that feeling.
	Over the next six or seven years, those who ask the most penetrating questions about the Games will be not the Games' opponents, detractors or Cassandras but those who care most about making them a huge success. I include in that our own two Olympians and other athletes, who must know a thing or two about careful and determined preparation. I refer to the success of the Games in all their aspects—the Olympics, the Paralympics, the cultural Olympics and their legacy.
	Discussion about the Paralympics is often, if not an afterthought, at least a second thought, so I thought that I might start with them because London led the way in 1948, I understand. I only recently discovered that they are in fact the parallel Olympics and they came about because doctors in London were advocating the benefits of exercise for those who were coping with war injuries. London has a great opportunity to distinguish itself again in ensuring that the facilities, the venues and the transport are fully accessible—I stress the word "fully". That, as my noble friend Lord Addington said, will have the incidental benefit of making things very much easier not for those who come within what most of us might think of as "disabled" but for those who hesitate because they have minor mobility problems, those who have young children and many more.
	London, I believe, must facilitate the Olympic Games as a spectator sport for people who have disabilities and the Paralympics as a spectator sport for able-bodied people, as well as vice versa. With regard to success in making people aware of the Paralympics, a great deal is owed to our own Paralympic athletes, who are very much a part of the bid. It also occurred to me to pay credit to the BBC, one of whose idents—I thought of them as interludes—features wheelchair users in the red-themed advertisements. I am sure that we will look at this in detail in Committee, but I wondered why the section of the GLA Act which imposes a requirement to have regard to promotion of equality of opportunity and has anti-discrimination provisions is not imposed not just on the ODA but on TfL and the LDA. There may be historical reasons for that.
	Modern legislation also includes sustainability duties and, as I think the noble Lord, Lord Brooke, said, we may well wish to explore in detail in Committee what is in the Bill now in that regard. The Mayor has said that these will be the greenest Games ever, and the way in which the Games are delivered, both with regard to disability issues and sustainability, will profoundly affect what is delivered. So, rightly, we are all interested in the how as well as the what.
	Volunteers will be queuing up to be involved. That was one of the successes of the Manchester Commonwealth Games. The culture of volunteering is one of the huge potential legacies. I understand that more than 70,000 expressions of interest have already been made. These people are a resource for organisations in the run-up. The day when we were originally to have debated the Second Reading of the Bill, I read about an organisation called the Africa Foundation Stone, which received £1,000—a tiny amount in this context—from Volunteer 2012 to hold an Olympic-themed event, a football tournament for young people. The group was formed five years ago by refugees from the Congo who aim to break down the barriers facing Africans living in east London. Sport is a tool, as the noble Baroness, Lady Thornton, was saying. That is just the sort of example to inspire us and show the benefits that can be reaped.
	There are also hundreds of community groups in the area with the potential to play a part in the cultural Olympics. We have not had any mention of those tonight. There is no mention of them in the Bill; I hope there is no significance in that.
	To succeed—I echo the noble Baronesses, Lady Thornton and Lady Valentine—the community as a whole and local communities need to be taken along with the preparation for the Games and the establishment of a legacy. We cannot have people saying, as some said of Manchester, that they did not get the maximum benefit because they did not feel that the organisers of the Games tried to incorporate opportunities for local businesses into their planning. That was the Federation of Small Businesses, and I should say that it was not a universally shared view, but it is, perhaps, a warning.
	There is a responsibility—I put it that highly—to create jobs for, and to skill, local people. None of that can be understated. I take the view that the ODA needs to set targets for the employment of local people, the granting of contracts to small and medium-sized enterprises, to BME and indeed to women-led businesses right from the start. I do not underestimate the difficulties, but assisting such businesses to bid—providing information, helping them through the tendering process—is hugely important. I commend what the LDA is doing thus far, but it is going to have to do a great deal and be very imaginative if it is to fulfil a role as champion for the area.
	There has inevitably been much scepticism over the cost of the Games, and that has been shared tonight. People keep asking whether the Games will be delivered on time and to budget. Asking whether they will be delivered on time is a nonsense, because if they are not on time, they will not be delivered. Perhaps, however, I am not the only person who has heard the story of the noble Lord, Lord Coe, about the Greek workman who said that there was no need to worry about the completion of the stadium in Athens if the opening ceremony was not going to be until the evening.
	Openness on the budget, as well as keeping it under control, is essential. I may be hampered by being a lawyer, but I am not as reassured as others have been—or as the Mayor tells me I should be—that the memorandum of understanding between the Mayor and the Government protects London council tax payers. The paragraph in what is quite a short agreement—even as a lawyer, I congratulate them on that—says that it means the "expectation" of Ministers and the Mayor is that the amounts set out in the memorandum be met by the National Lottery and council tax precept, and that the LDA will continue to be available should it be required; and that Ministers and the Mayor agree to "review" the arrangements. That, to me, is an agreement to agree, not any sort of guarantee.
	There is much reliance, as noble Lords have said, on the lottery. There must be uncertainties in a changing economic situation about how much the lottery can be expected to raise. I understand that the scratch card—which was printed initially in Atlanta, but now moved to Leeds—did not enjoy as much success as had been hoped for, so there is ground already to be made up.
	The amount paid by London council tax payers will be very topical during the next couple of months as the first precept is received. Wearing my London Assembly hat, I am keen that we ensure that what Londoners and others on their behalf pay is what they thought they had signed up to when they sent all those texts and e-mails in support; that is, £20 a year at band D for 10 or perhaps 12 years. If other costs are associated with the Games—I say that there are because £500,000 has already been allocated in the core GLA budget for associated costs next year—they should be made absolutely clear, because we all ought to know what is needed.
	The London Assembly has already asked the Mayor and the LDA a lot of questions—constructively, I hope—and I assure the noble Lord, Lord Glentoran, that if any proposal is made to take over the Centre Court at Wimbledon, we will be on to it. I suspect that it will not get permission for capital funding. We have had also a useful correspondence with the Minister for Sport about the role of the Assembly, and I will seek in Committee to be very precise about this. For now, I shall say simply that I am very keen that the Assembly has the powers as well as the will to play a full part in scrutinising the London bodies involved and their London activities, including the ODA.
	Although I do not doubt the Government's good intentions, I observe that their control of the ODA is enormous. The Secretary of State appoints not just the chair and all the members, but the chief executive, the finance director and the director of transport. Are the Government paranoid, or is it me? Despite all those powers of appointment and dismissal, Clause 23(6) states that the ODA must go on with versions of its strategy,
	"until it obtains the Secretary of State's approval",
	or, in the vernacular, it gets it right. And the Secretary of State still has powers of direction.
	There must be openness in the way the ODA operates. We have had the report of the Delegated Powers and Regulatory Reform Committee. Although it does not make any negative comments on the Bill, we have seen the memo from the Department for Constitutional Affairs. That draws attention to the large number of delegated powers, which mean that there will be a large number of instances where Parliament can be involved and say yes or no, but cannot amend what the Government propose.
	I continue the theme of clarity, but turn to transport. The London boroughs are concerned to know the likely extent of the Olympic route network—the noble Lord, Lord Berkeley, touched on that; the extent to which measures such as Olympic lanes will be imposed; the extent to which they are necessary; and when the ODA's traffic powers will start. I do not need to repeat what my noble friend had to ask about transport, but the points that he made about the lead-in time are those which the noble Lord, Lord Berkeley, made and we need to explore them.
	It is inevitable that one will sound negative when speaking on a Bill at this stage, but we have a job to do. The Olympic Games and Paralympic Games should stretch our horizons. They are about a "can do" attitude. We will do it; we will do it very well. The amendments from these Benches and, I am sure, from around the House will be designed to contribute to that.

Lord Luke: My Lords, it is a very special moment for me to be taking part in this debate about the 2012 Olympic and Paralympic Games. My father was a member of the International Olympic Committee for a considerable number of years and he always hoped against hope that the Games would one day return to Britain. He would have been delighted at the present outcome. He was also the predecessor of the noble Lord, Lord Borrie, as president of the Advertising Standards Authority, and I am sure noble Lords will agree with me that he would have thoroughly approved of the noble Lord's excellent speech.
	We have listened to many fascinating speeches on the Bill this evening. Many important points have been made, but the most important point is that all of us, on all sides of House, are in favour of the Bill.
	We have heard about a number of things since it was published, but we have not heard much about security. No doubt that is because security would be prejudiced if the arrangements were common knowledge. We must trust that this matter is under control, and I hope that the Minister will reassure us on that later.
	As my noble friend said, we on this side of the House have the same objective as Her Majesty's Government. During the course of the Bill, our debates will have the sole purpose of improving it.
	It has been a particular pleasure to listen to the maiden speech of the noble Baroness, Lady Valentine. When I made my maiden speech, I was simply terrified, and I do not know how I remained standing while doing so. The noble Baroness showed complete sangfroid, and I look forward to hearing her speak during the course of the Bill and on other occasions.
	These are the London Olympics, but we must not forget the events that will be taking place outside London. It is therefore disappointing that the Bill establishes the regional development agencies as the bodies concerned with preparing for the Games outside London. The RDAs are neither local planning authorities, nor highway authorities. These events will have local implications, not regional ones. We shall pursue this matter during the course of the Bill.
	It is axiomatic that the control of costs throughout the build-up period and during the Games should be robust but, at the same time, it must be sufficiently lightly applied to ensure easy co-operation between the various interests involved.
	As your Lordships know, the Bill will be going to Grand Committee. That is a good decision, although there is no provision for votes. However, in a Bill like this, is unlikely that there will be fundamental differences, and the informal atmosphere of a Grand Committee should lead to better discussions, particularly about details of the Bill. I ask the Minister to agree that we should have the fullest possible debates and to adopt a position permitting some flexibility on detail in the light of our discussions in Committee and subsequently.
	Many issues have been raised, not least the rather vexed question of the duplication of powers. It would be disastrous if works were delayed because of interminable arguments about responsibilities. For instance, which is pre-eminent, the Olympic Delivery Authority or the Greater London Authority? What is the precise role of the Mayor of London? As my noble friend Lord Higgins said, it must be defined so that he becomes a facilitator, and not in any way an obstacle to the smooth progress that is essential if all works are to be finished on time.
	Is the remuneration of the businesses that are being moved out, which were mentioned by my noble friend Lord Glentoran, being funded by the Government, as it should be, or is it being left to the Greater London Authority, which, I fear, may lead to considerable delay? The one thing we cannot have is delay.
	The tax on lottery proceeds has been a great bone of contention. It is completely illogical that it should be retained by the Treasury, which is refusing to fund coaching for our precious elite athletes adequately. They might just win medals, but only if they have the best available coaches. That is most urgent. It is not something that can happen in some years' time. It must happen now.
	Can the Minister guarantee that designs for buildings, structures and the general site will be British? Will the provision of horticulture and other facilities decorating the whole site be from Britain, and not sourced from Holland or anywhere else abroad?
	We have heard a lot about the legacy at the end of the day. Are the Government aware that the accommodation provided for the athletes in Sydney was all sold off before the Games opened as low-cost affordable housing? Are we planning, as I hope, to do something of the same sort, or will it be left to rot, as I am told happened in Barcelona?
	To conclude, I wish the Bill a fair passage through this House, coupled with the hope that the Minister will listen to what has been said today, and that he will help us to help him pass this Bill with as little extra delay as possible. I look forward to his reply.

Lord Davies of Oldham: My Lords, this has been a most stimulating debate. The undercurrent in all the speeches is support for the Bill. I would have been shocked had anyone expressed any other view except support for the broad principles. At the same time a wide range of reservations about aspects of the Bill, and uncertainties about it, have been expressed. That is what the Committee stage is for. I recognise that we will have a lively Committee stage and that we have a number of issues to discuss within that framework. I do however hope that we will not allow too many of the related but extraneous matters to intrude. I understand the view expressed by the noble Lords, Lord Glentoran and Lord Luke, and others, that we need to look at the question of funding, for instance with regard to elite athletes. How could we consider success with regard to the Games if British participation was not a success in itself? We need to address that. Yet within the framework of this Bill, it would be odd if we thought that we had a clause which actually identified how that funding was to be mobilised. That is a matter for other funding authorities and arrangements. I hope we will not be side-tracked too widely down extraneous matters of that kind, important though they are.
	The majority of speeches concentrated on what is in the Bill and the issues which remain to be defined with greater clarity. As all other Members have done, I congratulate the noble Baroness, Lady Valentine, on her maiden speech. It was a tour de force on her part. It is normal when one hears a speech of such excellence to express the hope that we will hear from the noble Baroness again soon. The great danger in expressing that view from this Dispatch Box is that it means a contribution in the Committee, which puts the Minister back on the hook. She will forgive me if I say that I hope to hear her again soon but that that is not an automatic invitation to participate in Committee—although she would be welcome. She demonstrated today that her expertise well fits her to play a constructive role in that respect, if she decides to do so.
	On the more general issues, we all recognise the enormous opportunities that the Olympic Games provide for this country and the significance of the success of the bid on 6 July. I reiterate my opening remarks: the International Olympic Committee is pleased with our progress and the introduction of this Bill so early after the successful bid, because it lays the framework on which we prepare for the Games. That leaves us open to one or two challenges which I intend to respond to in a moment, not least the one that we now have a context of restrictions as regards advertising. This was voiced by the noble Lords, Lords Glentoran and Lord Clement-Jones. The noble Lord, Lord Brooke, drew my attention to the Delegated Powers and Regulatory Reform Committee—of which he is a distinguished member—which also drew attention to this issue, as did the noble Lord, Lord Higgins.
	Confronted by those challenges, I was already withering in my seat before the blast from immediately behind me from my noble friend—I put the emphasis on "friend"—Lord Borrie, who told me exactly what a monstrosity I had erected in the Bill for the advertising industry. Let me assure him and the whole House that we want to act early because we have obligations to the International Olympic Committee on necessary restrictions on what is the useful phrase of "ambush marketing" and the use of Olympic symbols. We want to act early, but we want to act judiciously. Of course we have no intention of being censorious and prescriptive to that degree. My noble friend Lord Borrie gave vent to some fears that even the word "summer" might be subject to a ban if used within certain forms of advertising.
	Of course we intend to act carefully. A light touch will be applied in the early years, but we need to safeguard the interests of sponsors of the Games and consequent funding. We have obligations to prohibit and restrict ambush marketing, but we recognise the point made by the Delegated Powers and Regulatory Reform Committee and reinforced by the noble Lord, Lord Brooke, and other noble Lords who contributed to the debate, that we need to consult. I recognise that that obligation is enjoined on us and we intend to ensure that we have the framework for it. I cannot go into a great deal of detail at this late hour without producing a speech of inordinate length, but I recognise the force and legitimacy of the challenges that have been articulated this evening and I give earnest of intent that we have both thought through the issues and intend to reply to them during the Bill's passage. That will guarantee that advertising is a fruitful and important area of discussion in Committee.
	Likewise, on costs and financing of the Games, I hear what noble Lords say about council tax and, in particular, the siren voice, which came first from the noble Lord, Lord Clement-Jones, but he was not the only one, that the Bill should contain a cap on council tax obligations. The problem is obvious. Once we place a cap on any one area of expenditure, we leave the others open to greater exploitation. We then do not create a due regard for costs. If one contributor can reach a limit and cease to make contributions, we lose the essential partnership of scrutiny and control of costs for those contributions in which we want all contributors to be part.
	I will of course listen to representations in Committee, which I imagine will be presented with some force, but we take the issue as a matter of principle, so I shall be very resistant on that point. I am not negligent about the force of the arguments that can be presented—not least, as the noble Baroness, Lady Hamwee, reminded me, that we are approaching elections when precepts, costs and local taxation generally become the stuff of public debate. Questions will be asked. I do not live in a false world in which I think that I am likely to escape close challenge in Committee on these matters. I merely indicate that the Government have thought through the issue of costs and we will need a great deal of persuading to change our mind on how we approach the issue.
	I cannot give a date for the report on the analysis of KPMG and the work it is going to do. The noble Lord, Lord Clement-Jones, would not expect me to be definitive about when the report will be given. We are commissioning the report against a background where we know at an early stage that we want the most accurate and broadest picture we can get of the business plan, if you like, with regard to the Games for the future, if that is not too grandiose a term. This work is part of the arming of Ministers, the wider public—because we will in due course make such work public—and all those with authority for dealing with the Games and the plans for the Games to enable us to work towards intelligent budgeting. I have no doubt at all that the interest with regard to costs will run throughout the whole of the period, up to and including the period when the Games are being delivered.
	The noble Lord, Lord Glentoran, questioned me on a number of other aspects which I know he is going to pursue in Committee—for instance, the powers of the Mayor and the relationship between the various bodies. I understand that there are areas that we need to probe and discuss which will be properly located in Committee, but I am grateful to the noble Lord for using his Second Reading speech to indicate the areas of real concern.
	The noble Lord, Lord Clement-Jones, concentrated overwhelmingly on the main issues of costs and advertising. I make the obvious point with regard to the advertising run: that comparisons with Sydney are merely comparisons with the fact that Sydney got under way rather more slowly than we are doing. To say, therefore, that we should put a self-denying ordinance on ourselves to not look at these issues until four years immediately before the Games and let everything run in an untrammelled way up until then would not be politic or appropriate conduct on the part of the Government.
	I recognise that we have to make sure that we are fair to the bodies concerned and we are under an injunction from the Delegated Powers and Regulatory Reform Committee to consult. I give an undertaking from the Dispatch Box that, whereas we will be increasingly rigorous as we approach the Games with regard to advertising constraints, there will be a relatively loose rein in the next two and a half years. We recognise that we are some distance from the objective and, in any case, nothing could be more unfair than for people to fall foul of constraints of which they were not aware when they were doing their long-run planning for advertising, a matter to which several noble Lords referred during the debate.
	From his considerable experience of these matters, my noble friend Lord Pendry raised an issue that I should have anticipated. We are obliged to address ourselves to the question of the touting of tickets. I agree entirely that this is an iniquitous form of exploitation of the genuine sporting fan and of a whole range of leisure opportunities. We are obliged under the agreement to deal with this matter in regard to the Olympic Games, but when are we going to deal with the broader issue? My noble friend will forgive me on this occasion if I express my total understanding of his position, which he has articulated in the past, and my great sympathy with his objectives, but he will recognise that it would not be appropriate within this Bill to address the general issue of touting, difficult as that issue may be. What I am sure the noble Lord will appreciate is that dealing with this issue within this more limited framework gives us inside guide and experience as to how we might address ourselves to the more general issue, which I know he feels very keenly about. I think the noble Lord has support from other parts of the House for that.
	The noble Lord, Lord Higgins, addressed himself, as I expected, to the crucial issues of costs and advertising. I would hope that I have already covered these by this stage, but he did raise, for the first time among contributors to the debate, the issue of transport. He chilled my blood once again by indicating just how vulnerable transport systems can be in the congested capital in which we live. I take that on board entirely. It is the case that we are giving powers and expect carefully thought-out plans for how transport arrangements will work. My noble friend Lord Berkeley reinforced this point from his particular perspective. Let me say this: we would not have won this bid if we had not been able to convince the Olympic Committee that the bid was the best, technically, that they had seen. That revolved around the difficult issue of transport. I say "difficult issue of transport" because London is a difficult city in which to transport very large numbers of people. It is a very congested city with a very large number of inhabitants.
	Of course, we have plans in place for these transport issues; I have no doubt that we will discuss them further in Committee. If the noble Lord, Lord Berkeley, is in Committee, there is no doubt about that. The noble Lord, Lord Higgins, has a faithful acolyte when it comes to representation on transport. Suffice to say that we regard the issue of successful transport, and how we conduct ourselves over those crucial weeks when not only the athletes, but even more crucially, the very large number of visitors we expect to be at the Games, need to be transported effectively to the venues, as an absolutely crucial dimension.
	The noble Lord, Lord Addington, was kind enough to indicate that he and I had joint experience of disabled matters and legislation before this House. If I was in a position to reassure him on every conceivable point about the disabled and transport, and that he would not need to table any amendments at all, I would have produced a Bill unparalleled in the history of this House. The noble Lord will always have issues he wants to explore regarding the needs of the disabled. Let me give the noble Lord this reassurance: by 2012 certain aspects of transport will have passed through the framework of our recent improvements to the original Disability Discrimination Act. Certain of those consequent reforms will have worked through the system by then. I can, for instance, give him considerable assurances with regard to rail. We will have proper accommodation for the disabled, including the issue he raised about signs on trains. We will, to a certain extent, have those by 2012, though not necessarily on every train in the United Kingdom. He will know how far we have made progress in that respect. I expect him in Committee to take every opportunity to push me further on these points. Certainly, it is inconceivable that we would dare to mount the Olympic and—let me emphasise—the Paralympic Games, and yet fail in our duty to disabled attendees and participants.
	My noble friend Lady Billingham brought to my attention the advantages we could get from looking at the strategies pursued by places like Corby in terms of the development of sites and the necessary planning and co-ordinating activities. This Olympic venture requires us to obtain co-operation on a very high level. We will need all the experience we can get, although I take heart from the fact that the London boroughs are coming together well. But there is no doubt that we have a great deal to do.
	As well as emphasising the issue of advertising, the noble Lord, Lord Brooke, dwelt on the sustainable aspect of the Games, particularly on the sustainable environment in relation to the Lea Valley. That is a very important point. As the noble Baroness, Lady Hamwee, reminded us, the Mayor cannot call these the green Games if what we leave behind is very different from greenness and there is no environmental sustainability. That is an important dimension; we will need to reassure ourselves that it is in place, and we will have the opportunity to explore it in Committee.
	I have said that my noble friend Lord Borrie concentrated on the area he knows best—so well, indeed, that I would not dare cross swords with him on the matter. I merely take on board the challenges that he has presented and shall seek to reassure him in Committee.
	My noble friend Lady Thornton also emphasised the regeneration of the Lea Valley. It is long overdue, as she knows only too well. It is depressing that we do not have too many great river systems in London apart from the Thames. However, the Lea Valley is a considerable river system; in the upper reaches very considerable work has been done by the Lea Valley Regional Park Authority to improve it, much less in the area where the Olympic Games site is to be located. We must seize this opportunity to make sure that this inner-city part of the Lea is also part of that regenerative process and gives new enjoyment to the people who live there.
	The noble Baroness, Lady Hamwee, said that we would be exploring the role of the Assembly in this respect. I have no doubt that a great deal of our Committee work will be about the inter-relationship between various institutions and their responsibilities. I look upon that debate with the greatest enthusiasm, if only because I will not give way to the noble Baroness if she tests my enthusiasm at this point. We will need to explore these points. The inter-relationship between the authorities is a very important part of the success of the venture.
	The noble Lord, Lord Luke, mentioned security, which had been raised by the noble Lords, Lord Glentoran and Lord Higgins. The Bill does not spell out the security arrangements in great detail, but if we needed any reminder of how important security would be to the significance and success of the Games, we had it the very next day after the bid had proved successful. None of us can dwell upon the success of 6 July without recalling the horror of 7 July, so of course security will be a very important dimension of the Games. We are seeking in the Bill to identify how relationships with the police will work. There are limits to the extent to which we can be explicit, but I give the assurance that this is a very important consideration.
	The noble Lord, Lord Luke, also asked me to make sure that every plant in every building came from the United Kingdom. I might be stretched to do that. Given the extraordinary achievements of British architecture in recent years, I would be shocked if significant pieces of architecture required for the Olympic Games were not produced by British architects. Of course, the noble Lord would chastise me if I suggested that there should not be an open contest with the most successful and attractive bid succeeding; I am not about to produce a closed environment for British architects. The Olympic Games provide an opportunity for all aspects of British life to benefit. Architects ought to be able to show just what a high level of architecture we have in the United Kingdom. I hope that that will be demonstrated in the Olympic venues.
	We have had a most interesting debate. It started a little later than many noble Lords would have wished and it has finished a little later than your Lordships would wish. Therefore, I apologise for my extra contribution.
	On Question, Bill read a second time, and committed to a Grand Committee.

House adjourned at one minute past eleven o'clock.

Wednesday, 11 January 2006.